ANGUS BEEF BULLETIN EXTRA

December 20, 2018 | Vol. 11 : No. 12

management

2019 Beef Demand Projections

Beef demand is key and less certain in 2019.

Continued growth in U.S. beef production will keep the focus on beef demand in 2019. Beef production is slowing, but is forecast to increase 1.5%-2.0% year over year in 2019 to 27.5 billion pounds (lb.). This follows a projected 3.3% year-over-year increase in 2018 beef production to a record level of 27.0 billion lb.

Beef demand, including both domestic and international components, has played a key role in moving growing beef supplies through beef markets. Through 2018, total beef production has increased 14.2% (3.4 billion lb.) since the recent 2015 low. Strong beef demand has supported prices and margins at all levels of the beef and cattle industry as beef production expanded. Continued strong beef demand will be critical in 2019 as beef production pushes to new record levels.

There are, however, continuing and perhaps growing challenges and threats to beef demand in the coming year. In addition to record beef supplies, pork and poultry production will increase from record 2018 levels to new record production totals in 2019. Thus far, beef has maintained good demand relative to pork and poultry, as indicated by the fact beef retail prices are at near-record ratios compared to retail pork and poultry prices.

Beef trade has played a big role in moderating the domestic supply pressure from increased beef production. Beef exports are up 13.3% year over year through September. This follows year-over-year annual increases of 11.8% in 2017 and 12.8% in 2016. Beef imports have held steady in 2018, up just 0.4% so far this year. Total annual beef imports decreased 0.7% in 2017 following a 10.6% year-over-year decrease in 2016.

There are continuing and perhaps growing challenges and threats to beef demand in the coming year.

Numerous factors could become a bigger threat to both domestic and international beef demand in 2019. The U.S. economy has supported beef demand thus far, but recent volatility in the stock market highlights fragile macroeconomic conditions going forward. Rising interest rates and growing budget deficits will add to inflationary pressures and contribute to a stronger dollar. A rising dollar could add to export headwinds in the coming months.

The uncertain global trade situation continues to hang over beef and other agricultural markets. There is general agreement that trade disruptions will likely reduce U.S. and global macroeconomic growth in 2019. While the beef industry has avoided most of the direct tariff impacts thus far, indirect tariff impacts will continue to grow unless the trade situation is resolved very soon.

Consumers will see growing tariff impacts that may impact consumer spending and beef demand. Tariffs on consumer goods, especially if increased further, are likely to turn Dollar General into something like $1.20 General. Tariff-driven price increases could push consumers to cheap and abundant pork and poultry at the expense of beef demand.

Beef markets have largely been a case of “so far, so good” in 2018. I’m cautiously optimistic that this will continue in 2019, but the risks to beef demand will be higher in the coming year.

Editor’s note: Derrell Peel is a livestock marketing specialist for Oklahoma State University Extension. This article is reprinted with permission from the Nov. 19, 2018, edition of the Oklahoma Cooperative Extension newsletter Cow-Calf Corner.