Meat+Poultry - January 2024 - 31

T
he US beef industry is in the midst of one
of its largest two-year declines in beef
production. This will have significant
ramifications for everyone from consumers
to cattle producers. Consumers will face
higher retail prices than they did in 2023. Beef
processors will struggle to make money unless
they get a lot more for their beef than they did
at the end of last year. Cattle feeders will see
sharply higher live cattle prices because of the
reduction in cattle supplies due to ongoing beef
cow herd liquidation. This will make it even
harder for packers to make money this year.
This year could be even more challenging
for packers than 2023 because US cow-calf
producers continue to reduce their herds.
Packers and analysts had expected to see signs
of a rebuild of the beef cow herd early last year
as prices for all classes of cattle began to move
higher. But those signs did not materialize, as
Donnie King, Tyson Foods' president and chief
executive officer, told analysts last November.
His remarks came after Tyson reported that
its beef segment had an operating loss of $323
million in its fourth quarter ended Sept. 30,
against income of $375 million in the fourth
quarter of 2022. This meant an operating loss
for fiscal 2023 of $91 million, versus income
of $2.502 billion. This was Tyson beef's first
annual loss since 2015, when it reported an
operating loss of $66 million. Its previous
biggest loss was $244 million in 2006.
JBS Beef North America in contrast
reported a healthy profit in its 2023 third
quarter. But for the US beef division, a
shortage of cattle for slaughtering will remain
a challenge in the fourth quarter and in 2024,
director Wesley Batista Filho told analysts.
The unit's adjusted EBITDA in the quarter was
$103 million, with an adjusted EBITDA margin
of 1.7%. EBITDA in the 2022 third quarter was
$481.1 million for an 8.7% margin. Beef margins
in North America during the quarter suffered a
material impact compared to the previous year,
as a result of changes in market conditions due
to the turn of the cattle cycle in that region,
said JBS. This reduced the availability of
animals for processing and therefore increased
costs, the company said.
OTHER PROTEINS GET A BOOST
The US Department of Agriculture's forecasts
at the end of last November were for 2024 US
beef production to total 25.810 billion lbs. This
would be down 1.122 billion lbs or 4.2% from
an estimated 26.932 billion lbs in 2023. It would
be down 2.481 billion lbs or 8.8% from 2022's
28.291 billion lbs. In contrast, pork and broiler
production this year will both increase slightly
from 2023, said USDA's Economic Research
Service (ERS). It forecasts pork production at
27.730 billion lbs, up 513 million lbs or 1.9% from
2023. It forecasts broiler production at 46.65
billion lbs, up 441 million lbs or 1.0% from 2023.
Beef's sharp decline means that red meat
and poultry production this year will be an
estimated 106.529 billion lbs, down 76 million
lbs or 0.1% from 2023, according to ERS. It
also means that disappearance (consumption)
of red meat and poultry will be 224.1 lbs per
person this year, versus 225.2 lbs in 2023. Beef
will see a big decline to 55.6 lbs per person
from 57.9 lbs last year and 59.1 lbs in 2022.
Beef and veal exports will decline this year by
190 million lbs from 2023, while imports will
increase by only 37 million lbs. Any increase in
imports in the next two years will fall far short
of filling the decline in beef production and
exports, said analysts.
The sharp reduction in beef production will
be due to reduced cattle numbers again this
year. The Jan. 1, 2023, total of 89.274 million
head was down 2.803 million head or 3.0% from
the prior year. This year's Jan. 1 total might
be down another 1.5 million head and would
likely represent the low in total inventories
in the current cattle cycle. But analysts said
any rebuilding of the beef cow herd will not
begin until 2025 at the earliest. The reasons
for this are numerous but key factors are
continuing drought and economic drivers
such as high input costs, interest rates and
financial recovery.
Yet no less than 10 entities or individuals
have announced plans to build new beef
processing plants in the United States. One
hopes they are looking at the current and
future size of the US beef herd and how much
processing capacity the industry currently has.
Should they do so with an open mind, they
might decide to shelve their plans and save
their investors a lot of money. For the industry
has an over-capacity issue which will only
worsen in the next two or three years.
The catastrophic drought from 2010
through 2012 led to the closure of nine beef
Packers and
analysts had
expected to
see signs of a
rebuild of the
beef cow herd
early last year
as prices for
all classes of
cattle began to
move higher.
But those
signs did not
materialize.
www.meatpoultry.com | 01.24 | MEAT+POULTRY
31
http://www.meatpoultry.com
Meat+Poultry - January 2024

Table of Contents for the Digital Edition of Meat+Poultry - January 2024
