Livestock > Outlook & Prices > Prices
May 2024
Why USDA beef supply and use forecasts change over time
Niels Bohr, Nobel Prize winner in Physics, said, "Prediction is very difficult, especially if it’s about the future." He’s correct. But that shouldn’t stop us from trying.
Not only is predicting the future difficult, it’s often thankless. Forecasters rarely get credit for successful predictions since outcomes can appear obvious in hindsight. But forecasters get bashed really hard for predictions that do not come to fruition.
Even though predictions may well turn out wrong, the act of forecasting has value in itself. Envisioning the future helps develop a plan. A well thought out plan can be a path to success. The earlier you develop a plan, the better. However, the farther into the future you look, the less reliable forecasts are. That makes contingency planning important.
Expectations are what we think will happen. Reality is what actually occurs. Forecasters hope these two will match. Often, they do not. As time passes, variables change. The earlier a forecaster can identify changes, and adjust, the better. Savvy forecasters are rarely shocked by anything and do not make knee jerk changes to their predictions.
Delayed herd expansion and other factors boost beef supply
On May 12, 2023, USDA released its first forecast of 2024 beef supply and use in its monthly World Agricultural Supply and Demand Estimates (WASDE). That report projected total supply for 2024 at 29.043 billion pounds including beginning stocks of 670 million pounds, total production of 24.813 billion pounds and imports of 3.560 billion pounds.
USDA’s May 12, 2023 WASDE report had 2024 beef production down 8.1% compared to 2023 (Figure 1). USDA’s July 12, 2023 forecast for 2024 beef production declined further to down 9.0%. Subsequent forecasts rose steadily. USDA’s May 10, 2024 WASDE forecast 2024 beef production down only 1.4% from 2023. Why? Heifers earlier thought to beef cow replacements are going into feedlots. Beef cow slaughter is higher than previously projected. Dressed weights are tipping the scales heavier. All boost beef production. Further adding to supplies is beef imports rising faster than expected and exports lagging earlier projections.
While 2024 beef production and supply have exceeded forecasts, prices have also risen. In May 2023, USDA forecast first-quarter 2024 slaughter steer prices (5-Area, direct, total all grades) at $175/cwt. This would have been $14.10/cwt or 8.8% higher than in the first quarter of 2023. First quarter 2024 prices averaged $181.03/cwt. This was $20.11/cwt or 12.5% higher than 2023’s first quarter. Selling more volume at higher prices signifies rising demand.
What’s the outlook for 2025?
On May 10, 2024, USDA released its first forecast for 2025. Beef production is projected at 25.187 billion pounds, down 5.5% from the current 2024 forecast of 26.662 billion pounds. Beef exports are expected to be 2.5 billion pounds which would be down a whopping 11.3% from 2024’s forecast of 2.818 billion pounds. USDA forecasts 2025 beef imports at 4.225 billion pounds, up 1.3% from the 4.171 billion pound estimate for 2024.
Lower beef supply in 2025 will lead to a reduction in domestic per capita beef use to 55.6 pounds per person on a retail-weight basis. This would be down 2.7 pounds or 4.6% from 2024. USDA is expecting 2025 slaughter steer prices to rise to $188/cwt, up 2.4% from the current forecast for 2024 of $183.51/cwt.
Expect more changes
These forecasts are not set in stone. Forecasts rely on historical relationships and consider current conditions, existing laws, regulations and policies, normal weather patterns and underlying trends. All of those drivers can, and do, change between forecasts. Supply or demand shocks can appear unexpectedly at any time. Uncertainty in global markets makes beef exports and imports particularly difficult to forecast.
Beef supply and use projections for both 2024 and 2025 will change. USDA re-forecasts each month to reflect new information and changing conditions. This is how USDA’s forecasting success should be measured. Not by achieving 100% accuracy, but by how well they reflect changing market fundamentals.
USDA forecasts are important because farmers and agriculture businesses use them in production and marketing decisions. Ability to make informed decisions, based on timely and accurate forecast information, can improve profits. Policymakers consider forecasts in evaluating policy options and making decisions. Futures traders often adjust positions based on USDA forecasts.
Why do USDA and private analyst forecasts sometimes differ?
Private analysts often use USDA forecasts as benchmarks for their own forecasts. Private analysts, however, can change how they make forecasts whenever they want. USDA has set guidelines for making forecasts. Discrepancies often occur between USDA and private forecasts. That’s okay. This can help in contingency planning. Composite forecasts can help producers develop their own expectations.
Lee Schulz, Chief Economist, Ever.Ag Livestock Division; ISU extension livestock economist (on leave), lschulz@iastate.edu
