Thursday, March 23, 2023
HomeMoneyA Meat Recession Could Be in The Future, Supply Shrink Coming

A Meat Recession Could Be in The Future, Supply Shrink Coming

Fears over a potential meat recession have set in right before the holidays.

We Do Not Have The Meats

An online meat delivery company, Good Ranchers, put out a warning to consumers on social media that “a meat recession is knocking and supply is about to be tight” as cattle herds continue to shrink.

“The cattle herd has shrunk due to droughts,” Good Ranchers wrote on its Instagram account. “Our total meat supply for the coming year is down significantly. This is one of the main reasons a meat recession is coming.”

Walter Kunisch is the senior commodities strategist at Hilltop Securities. He agrees with Good Ranchers and told FOX Business that United States beef cattle supplies will continue to shrink through 2023, which will drive up the prices for consumers.

“We believe that an acute and protracted drought in the southwest U.S. is responsible for increased culling of beef cattle which is leaving the U.S. structurally short beef cattle and beef supplies,” Kunish told FOX Business.

The USDA reported that the number of cattle moving from pasture into a feedlot to be prepared for slaughter in September declined by 4% nationwide year-over-year. In certain states like Kansas, that number was as high as 11%.

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Lingering Drought

The biggest issue is that droughts have been lingering in key cattle-producing states in the Southwest, such as Kansas, Nebraska, Oklahoma, and Texas, since last year.

“There’s been an acute drought in those states for really the better part of 2022,” Kunisch said, adding that there hasn’t been much relief, either.

States like Texas have not seen consistent rainfall since September 2021. As a result, the availability of pasture has declined. “That drought has been so prolonged, the opportunities to graze or for ranchers to put cattle in the pasture has sharply declined,” which is forcing ranchers to put cattle into feedlots at a faster pace, Kunisch said.

As if that wasn’t bad enough, breeders have also started culling unbred female cattle at a higher rate, which reduces the supply of future animals for slaughter. Unfortunately, even when the drought finally begins to subside and the pasture conditions have improved, ranchers will likely start retaining females for breeding in an attempt to increase their breeding stock.

When the ranchers do this, supplies will become even tighter. It takes around 19-24 months from the time a rancher decides to use a female for breeding to when the offspring are ready to be slaughtered.

Other commodities are seeing price increases as well. Higher costs for corn, wheat, and operating costs such as fuel and labor are creating “persistent higher cattle prices, which can lead to higher beef prices,” Kunisch said.

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