Despite some recent improvement, inflation and higher retail meat and poultry prices are weighing on consumer buying. A recent report from CoBank relayed that meat prices are up roughly 30% from 2019 levels and up 6% year over year.

“Consumers may have seen moderate relief on beef prices at the store, but overall grocery prices are still rising, and smaller meat portions are a good way to keep the overall grocery bill in check,” said Brian Earnest, lead economist for animal protein at CoBank.

Additionally, expected supply constraints may prevent consumers from purchasing the same amount of meat as last year.

Earnest said red meat production has been running about 3% lower year over year since the beginning of February and is expected to drop further during the second half of 2023, concurrent with declining fed cattle availability and lower slaughter weights.

On the export side, demand has been relatively robust for U.S. animal protein despite global economic pressure, leading CoBank to remain optimistic about the 2023 export outlook.

Overall, Earnest said that much like the fourth quarter of 2022, red meat and poultry output exceeded expectations during the first quarter of 2023, which kept downward pressure on prices. As grilling season heats up, CoBank expects performance in the animal protein segment will strengthen in the months ahead.

Earnest reported that cattle markets ended the first quarter of 2023 in a strong position as fed cattle have traded above $165/cwt. and feeder cattle above $190/cwt.

While Earnest says consumer demand over the past three years “has been nothing short of incredible,” resistance to higher prices has begun to surface. Grilling season is just around the corner, but consumers will likely struggle to maintain past spending habits due to the economy, he added.

Meanwhile, stronger cattle prices and weaker cutout values are pressuring packer margins, leading to easing production. Cumulative cattle slaughter is down 2.6% year over year, and beef production is down 4.3% year over year, Earnest noted.

A large part of the cattle industry story over the past few years has been drought, and while conditions have been improving, Earnest said forage and hay supplies remain tight throughout many grazing areas of the country. This will remain a limiting factor to rebuilding the cattle herd.