New Record Set for Beef Demand in 1st Quarter

The beef industry witnessed record beef demand during the first quarter of 2003 compared to previous first quarters.  Valuing beef production at wholesale, total dollars for beef were up $573 million or 7.8 percent compared to a year ago.  The first quarter of 2001 had previously been the high water mark for beef demand, but 2003 surpassed that record by a little less than 1 percent.  Demand continues to be very supportive to beef values and prices for all classes of cattle.

Beef production totals during the quarter were down compared to 2002 but beef values were up nearly 9 percent.  The average cutout value during the quarter reached the second highest average in history, second only to the first quarter of 2001.  The following figures illustrate how much beef demand has grown over the past few years.  In 1999, Q1 production totaled 6.397 billion pounds and the cutout averaged $99.28 per cwt.  In 2003, Q1 production totaled 6.317 billion pounds and the cutout averaged $124.95 per cwt.  Comparing 2003 to 1999, this shows very little difference in the amount of beef produced, but nearly a 25 percent increase in the value.  This increase has translated directly to higher fed-cattle prices over the past several years.  Fed-cattle prices averaged $62.85 during the first quarter of 1999 compared to $78.18 in 2003. 

Strong beef demand should continue to pay dividends for the industry through the spring and summer.  Cattle supplies will remain relatively tight and production levels will run below 2002 levels.

Wholesale beef prices will be well supported compared to 2002 during the next several months.  The U.S. economy and the war in Iraq remain constant concerns, but so far, beef demand has been affected very little by these factors. Overall, look for demand to remain strong during the course of the year. 

In the long run, beef demand growth supports the profitability of all beef segments.  Every level benefits by additional dollars coming into the industry.  Strong beef demand coupled with smaller total production levels will support calf prices above long-term average levels for the next several years.