A Few Thoughts by John Nalivka: First quarter 2022 beef industry prices across the supply chain
Inflation is a major topic across the country with energy and food prices leading the headlines. While beef prices are notably higher and have been part of the inflation story, I am not quite sure if the retail meat case deserves the attention it has received in the general consumer news media. Demand has been the driver to these beef prices up to this point with most consumers have been willing to pay those higher prices. However, record high gasoline prices will continue to have an increasing impact on American consumers and definitely could be negative to beef buying.
During the 1st quarter of this year, U.S. beef production was up 2% from the previous year. At the same time, the U.S. exported 12% pf that production with those exports representing a 6% increase over a year earlier. The remaining 88% was purchased by U.S. consumers at the retail meat case who paid on average 15% more than they did during the same period in 2021. These are impressive figures and definitely illustrate the strength of U.S. beef demand as we came into this year.
With that quick look at beef production, we can look at prices moving down the beef supply chain. At the packing plant, the Choice Cutout averaged $271/cwt. for the 1st quarter and posted an 18% gain over the prior year while the Select Cutout averaged $265/cwt. for the 1st quarter and was 21% higher than a year earlier. Both cutout values were record high.
Moving further down the chain to the feedlot, prices for 5-Area Direct Choice steers averaged $140/cwt. during 1st Qtr. 2022 and was 24% higher than during the same quarter in 2021.
Finally, down to where it all begins at the cow-calf producer and backgrounding, prices for feeder cattle (750-800 lb.) during the 1st Qtr. averaged $155/cwt. and 15% higher than during the same quarter in 2021. At the same time, the cost of gain in the feedlot jumped 20% which was a limiting factor to feeder cattle bids. Calf prices for the 1st Qtr. also posted a 20% gain over the prior year with 500-600 lb. steer calves averaging $191/cwt.
Prices across the beef supply chain have been significantly higher this year. With the primary factors (feed and fuel) pushing costs of production significantly higher, those higher prices are not only welcomed, they are needed. Reduced supply typically leads the way to higher prices, but this year, demand has been the leader. Demand will remain key as supplies tighten into 2023 with consumers continuing to face ramped inflation. Demand entails not only the willingness, but also the ability to buy a product.
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