SPRING HILL, Tenn. – The race is on as wholesale beef prices are outperforming most expectations for the middle of February, said Andrew P. Griffith, University of Tennessee associate professor of agricultural and resource economics.

“February is largely considered the middle of winter and a time for a lull in beef movement, but this has not been the case in 2023,” he said. “The lack of winter storms has also contributed to strong beef movement. In fact, beef movement could be considered strong.

“It is clear consumers are demanding beef both domestically and internationally, and there is no reason to expect this demand to decline other than the strain placed on disposable income from inflation and higher interest rates,” he added.

However, he said, those two factors do not appear to be a deterrent at this time.

“It is also clear that domestic beef production will decline throughout 2023 and 2024,” he said. “This will keep domestic prices elevated, and result in a reduction in exports and an increase in imports.”

He said the milder weather has resulted in an earlier green up in pastures, which brings optimism and a little forage – and the $2 per pound price mark for 500-pound steers is four to six weeks earlier than expected, catching the attention of sellers.

“If the same optimism remains in the market through the spring months, then 500-pound steer prices may reach $210 to $215 per hundredweight,” he said. “These prices are ambitious, given market fundamentals, but the market does not always run based on fundamentals.”

He said it’s clear industry participants can see there are fewer cattle today than one year ago, and there will be even fewer cattle moving throughout the next couple of years.

“Thus, they are already competing more strongly for calves in the near-term, with the hope of getting ahead of extremely high prices in the future,” he said. “This may or may not turn out to be a good strategy, depending on the future feed situation, and consumer demand.

“Regardless, cattle buyers are in fierce competition as they pull cattle from a smaller calf crop that will be even smaller this year,” he added. “Cow-calf producers are going to have some opportunistic decisions to make the next few years as they will be inclined to retain heifers to grow the beef herd. However, those same heifers will be highly valued in the marketplace.”

He said the strong prices are being supported from both the supply and demand side.

“From the supply side, there are fewer cattle on feed, which means fewer cattle being slaughtered, compared to last year,” he said. “At the same time, dressed weights have declined below year-ago levels, which is another hit to beef production.

“Similarly, beef demand has remained strong, despite inflation and higher interest rates,” he added. “Domestic and international consumers have not slowed much on U.S. beef.”

He said consumers used to focus on end meats (cut from the loin primal, which is between the rib and round) during the winter months, but for the past few years, the market has experienced strength in middle meats (i.e., T-bones, sirloins, filets and strips) during the winter as well.

“Thus, it appears there may be a shift in demand patterns,” he said. “Consumers have been demonstrating their desire for higher quality beef, and it appears they demand steak cuts year-round. This can be seen with the wider-than-normal Choice Select spread.”

He said the finished cattle market pushed higher the previous week as cattle feeders remain in control.

“Cattle feeders have gained significant leverage over the packer due to a reduced number of animals coming off feed and reduced weights,” he said. “This has left packers in need of inventory to meet obligations. This may seem like unfamiliar territory to cattle feeders since it has been several years since they did hold considerable leverage.

“However, cattle feeders will maintain this leverage for the next couple of years as the cattle industry works to rebuild beef cow inventory,” he added. “The question on most people’s minds is: How quickly and to what level can cattle feeders raise prices? At the rate they are going, they have and may continue to exceed industry expectations.”

As for the outlook going into spring, and even into summer, he said, “One is always guaranteed to be wrong when predicting the future, but there is no reason to expect anything to soften moving into the spring and summer months. There is certainly concern that consumers will have to back off of beef purchases, but in no way have we really seen this happen.

“Thus, there is no reason to predict that it will if we have not seen it happening,” he added. “Could wholesale beef prices hit $300? I guess they could, but I am not sure that is what I expect. I simply do not expect them to decline much.”