While inflation is declining, the cost of goods continues to increase leaving shoppers to suffer the impact of higher prices at the grocery store. The USDA Food Price Outlook says food prices will slow down in 2024 compared to previous years, but some shoppers will have a different experience, including beef consumers. As forecasts are showing possible difficulties for the U.S. Beef Industry in 2024.
Various factors are contributing to the anticipated difficulties in the U.S. beef industry. These include supply chain constraints, rising costs of production, and the ongoing impacts of environmental factors. Additionally, shifts in consumer preferences and market dynamics are further complicating the landscape. As demand for alternative proteins grows and sustainability concerns come to the forefront, traditional meat manufacturers are facing pressure to adapt and innovate. While there are plenty of challenges to face in the next couple of years, one thing is certain–consumers continue to choose beef as a top source of protein with superior taste.
Beef Supply Chain Constraints
Despite increasing beef prices, the demand for beef has remained strong as consumers claim they will continue to purchase beef. Unfortunately for beef manufacturers supply is declining and is expected to be 56 pounds per capita in 2024, 1.9% lower than 2023.2 This is due to the contraction of beef heards, ongoing drought, higher producer input costs, supply chain issues, and more. Which means beef manufacturers will be faced with narrowing margins in 2024.
In the face of historically high cattle prices, margins are going to suffer. The biggest question for manufacturers is when the domestic herd is going to recover from years of liquidation. As of right now, opinions are split down the middle. Some outlooks are saying the herd will be replenished by 2025, and others are saying short supply and high cattle prices will continue well into 2025.3,4
As beef supply tightens, consumer shopping decisions will determine the outcome of cattle prices. If consumers continue to buy beef at higher prices, then cattle and calf prices will continue to rise. However, if consumers stop purchasing as much beef, cattle prices may see more resistance. These concerns will continue to trouble the beef cattle industry if supply does not start to bounce back.
Fortunately, consumers in the United States are willing to pay around $9/lb for steak, which is within current pricing, however, prices are expected to reach record highs in the upcoming months–approaching nearly $10/lb. This will likely result in a consumer shift to less expensive cuts rather than a complete avoidance of beef, but will still have an impact.5
Climate Impact on Beef Supply
Droughts have been affecting the West and Great Plains regions for the last couple of years. Droughts occur when an area or region has experienced below-normal levels of precipitation, which leads to reduced soil moisture and crop damage. One of the main reasons for the decline in cattle herds is the diminishing quality of pastureland across the Midwest due to the ongoing drought. Beef cattle herds have been declining since 1975 and have reached a 61-year low, according to the U.S. Department of Agriculture.6
In addition, when climate conditions are not favorable, crops like corn and soy suffer which can increase the cost of feed, therefore, increasing the cost to raise cattle. Some of the cattle liquidation has been a result of increased feed costs compared to other animals. Fortunately, feed costs are coming down which could help cattle farmers feel some relief.
Cost-Conscious Consumers Still Choose Beef
One of the most immediate concerns arising from rising beef prices is the potential impact on consumer purchasing behavior. As the cost of beef products continues to climb, consumers may face difficult choices at the grocery store, potentially altering their buying habits and preferences. 20% of consumers reported they will spend less money on steak in 2024. And when asked about future consumption of beef, 80% of consumers said they are going to maintain or consume more beef with just 14% saying they will eat less beef. The top reason for the decrease in consumption of beef is price, while the other reasons are for environmental or health reasons. These trends show that consumers are not slowing down on beef consumption. Only 2.8% of consumers are saying they will eat less beef for environmental reasons. And with the alternative meat market struggling to gain traction and losing sales, it is safe to say meat consumers are not going anywhere.7
In addition to consumers purchasing less expensive cuts of beef, they will also be choosing to eat at home more than dining out. Nearly 50% of consumers anticipate they will dine out less.5
Managing Profitability in a Challenging Market
As a food ingredient manufacturer, Kemin is attuned to shifts and trends within the food industry, particularly those that impact the availability and cost of essential ingredients. By fostering close partnerships with our customers, we collaborate to address shared challenges and explore innovative solutions. By maintaining open communication channels and staying informed about industry developments, we can anticipate potential disruptions and adapt procurement strategies accordingly.
In addition, we have products available to help you reduce costs amid record-high beef prices. Our latest innovation, Proteus®can help mitigate the challenges caused by rising beef prices. Proteus is a clean label functional protein that can help reduce formulation costs and improve yield and throughput. Helping your bottom line and keeping consumers peace of mind.
References:
- USDA, Food Price Outlook, 2024.
- USDA, Office of the Chief Economist, “World Agriculture Supply and Demand Estimates,” 2024.
- Iowa State University, "Beef cow heard to shrink for years to come," 2023.
- University of Georgia Extension, 2024 Beef Cattle Outlook, 2024.
- Consumer Beef Tracker, 2020-2023; NielsenIQ.
- Missouri Independent, "Droughts complicated by climate change result in U.S. beef herd hitting historic low," 2024.
- Food Business News, "Plant-based meat market at a crossroads amid declining sales," 2023.
