Profitability in 1999 for U.S. Beef Producers; Consumer Beef Prices to Remain Steady

As the Century draws to a close next year, financial conditions for beef producers are positioned to improve during 1999 after three years of losses, and consumer prices for beef should remain steady, according to the NCBA.

All sectors of the beef industry have endured severe hardship due to record high feed grain prices in 1996, cyclically large cattle numbers, record heavy slaughter weights and record supplies of pork and poultry. In addition, adverse weather conditions and the Asian financial crisis have kept cattle prices low.

However, in 1999 beef producers will experience modestly higher prices due to expected smaller beef production levels from 1999 through 2001, according to NCBA Chief Economist Chuck Lambert.

"After reaching an all-time high of 25.7 billion pounds in 1998, commercial beef production is projected by USDA to decline more than five percent or approximately 1.5 billion pounds in 1999," he said. "Retail beef prices will likely remain steady in 1999 despite the decrease in beef production due to tighter retail margins and continued competition from total meat and poultry supplies. Total pork supplies will increase one to two percent in 1999 and total poultry production is projected to increase four to five percent during 1999."

Lambert said smaller domestic beef supplies in 1999 mean that domestic per-capita beef consumption will decline in 1999 to less than 66 pounds from 67.9 pounds in 1998.

After increasing over the last two years, annual increases in beef imports will moderate in 1999. Beef exports are projected to hit record-high levels in 1999 increasing eight percent to 2.35 billion pounds. Imports are expected to increase about 150 million pounds in 1999 to 2.8 billion pounds. However, the increase in beef exports should offset import growth and contribute to lower net domestic beef supplies.

"Loss of equity in 1998 and increasing uncertainty in the global markets are escalating the need to add value to beef by moving to a more consumer-driven marketing plan," Lambert said. "For instance, new heat-and-serve beef entrees, such as microwavable pot roasts, are expected to continue to increase in the retail market in 1999 to meet consumer demands for more convenient beef products."