The USDA’s Agricultural Outlook Forum took place Feb 23-24, covering a wide range of topics within the agricultural space. From sector-specific outlooks to drought and water supply, speakers covered a lot of ground. We summarized some of our main takeaways for you here.
What are food prices expected to do this year?
Overall, the sentiment is that conditions will be better than last year, but prices will stay elevated compared to historical norms.
- In 2022, none of the major food-at-home categories on the Consumer Price Index decreased. They all increased 5% or more compared to 2021. Eggs, for example, saw more than 30% growth.
- In 2023, USDA is projecting a slower rate of price increases. Probably somewhere in the 8% range compared to 10% the year prior. This is all assuming weather, supply chain conditions, and other factors stay the same.
What factors are keeping prices elevated?
A host of challenges and unknowns are keeping prices from contracting.
- Weather and drought, labor challenges, supply chain conditions, geopolitical tensions, and general inflationary pressures, all play a role.
- If prices expand and contract like a slinky toy, and there are a lot of factors in the mix, then the longer it takes for conditions to return to normal.
What can we expect from meat and poultry prices in 2023?
The outlook is mixed: Turkey and cattle prices are expected to rise, while hogs and broiler chickens are expected to fall.
What were recurring themes through some of the sessions?
While there are reasons for optimism, the markets are not quite out of the woods yet.
- Speakers emphasized the risks and volatility arising from the current state of supply chains and geopolitical disruptions.
- From having “more risks than ever before” to “extreme volatility,” experts agreed that volatility is likely to continue through 2023.
What is the USDA’s outlook for grains and oilseeds, in the U.S. and globally?
The USDA expects global supplies of grains and oilseeds to be tight this marketing year.
- Global ending stocks (excluding China) of wheat are at their lowest level since 2007/08 and corn is at its lowest since the 2012/13 marketing year.
- Corn acreage is being favored in the U.S. this year. It is anticipated that there will be more corn than soybean acres planted in the U.S this year.
How are broader economic factors expected to develop through 2023?
- The U.S. dollar is very strong and expected to remain strong through the rest of 2023, making U.S. exports more expensive for buyers internationally.
- Some forecasts for 2023 suggested less beneficial conditions in the first half of the year, followed by improvements in the second half: Better economic conditions, an improving cargo market and inventories being replenished, for example.
Animal Protein Demand
In 2022, meat sales reached a record $87 billion, a 6% increase over the previous year. This happened despite a 3% volume decline, about 600 million units, year-over-year. Data included fresh beef, chicken, pork, and turkey.
“I think overall, it is clear consumers are willing to spend more at the meat counter,” Earnest said. “Beef demand has been exceptional.”
For context, retail beef consumption declined from 2009-2015 as prices climbed an average 7% per year, according to USDA data compiled by CoBank. In response, retail beef prices slowed from 2015-2017, rising 2% on average.
Since the pandemic, beef disappearance has not slowed, despite retail prices increasing 9% or more each year.
Animal Protein Production
Protein production is expected to moderate after years of growth. Beef is going through significant supply constraints after intense drought forced ranchers to sell off their cattle herds. Cattle slaughter increased more than 11% in 2022 compared to the prior year. The national herd count was down 3% as of Jan. 1.
Pork is seeing a moderate rebound. Despite hog inventories being down, growth in the breeding herd size suggests potential growth in the back half of 2023. Rising feed costs are hampering chicken growth this year after stronger than expected production in 2022.
Summer Grilling
For a bacon cheeseburger, meat cuts and formulations are looking favorable ahead of the summer months. Beef grind formulations are above historical norms, but lower than when they peaked in 2020, especially for 50s. Recent data show they are going for less than $125 per hundredweight. Meanwhile, the pork belly primal is down 20% compared to a recent 5-year average. It is valued at roughly $100 per hundredweight.
For middle meats, such as ribeye and brisket, prices are above the 5-year average from 2017-2021, but lower than what they were in the fourth quarter. Ribeyes have declined in value since January 2023, but are starting to rebound. They are valued at roughly $450 per hundredweight. Briskets steadily declined last year, but they remain 17% above the 5-year average. Recent data show briskets valued less than $200 per hundredweight.
Audience Poll
What animal protein will be most popular this grilling season? Most attendees selected beef as their favorite, followed by chicken and pork. Michael Nepveux, Lead Protein Analyst at Stable, and Earnest agreed with the audience consensus.
Overall
Macro conditions are continuing to pressure consumer spending, but so far, meat demand has been stronger and more resilient than expected. Earnest said the grilling season will be full of challenges as producers continue to adjust to inflation.
