BEEF rib roasts have long been a holiday favorite for most Americans and this year will be no exception. Retailers featured them prominently in their fliers last week and will likely do so again just before Christmas Day. The most aggressive pricing in CBW’s home town in northern California was by Safeway, who priced a USDA Choice bone-in ribeye roast at $5.77 per lbs. But this was a Member Only Price and came with a minimum $150 or more of purchases. The next lowest price was $5.79 per lb at Lucky for a Choice roast with a digital coupon. Raley’s priced the same roast at $6.97 per lb but also for members only. Its non-member price was $10.99 per lb. The Smart & Final chain priced its Choice roast at $7.97 per lb with digital coupon savings, while FoodMaxx priced its roast at 5.88 per lb, which likely meant it was USDA Select.
Despite rising prices, the prospect of Prime rib for New Year’s Eve dinner continues to appeal to consumers, says Derrell Peel, Oklahoma State University. Seasonal price increases pointed to wholesale ribeye prices increasing by 30% from the beginning of October through November. By late November, ribeye prices had pushed 13.4% higher compared to last year. Even with higher costs to consumers, the beef demand index calculated by the Livestock Marketing Information Center confirms that retail beef demand was stronger year-over-year in each of the first three quarters of 2024, he says (as reported in BEEF magazine).
Strength Has Been In End Meats
The strength in beef demand for much of 2024 has been mostly in the end meats rather than the middle meats, say Peel. In fact, for the first 47 weeks of the year, the average price of rib and loin primals was slightly lower year-over-year, with ribs down 1.4% and loins down 0.6%, while the price of the chuck primal was higher by 7.4% and the round primal was higher by 8.4%. But since the middle of October, the price of all the primals has been higher compared to the same time last year. Choice boxed beef prices have averaged 2.7% higher year to date but were 4.3% higher year-over-year in November. Higher boxed beef prices have coincided with a 2.2% increase in fed beef production thus far in 2024, which indicates demand is strong, he says.
The value of lean carcass cuts, especially from the round, has been supported this year by strong demand from the ground beef market, says Peel. Non-fed beef production from cull cows and bulls was down 13% year-over-year through mid-November. This was the result of a sharp year-over-year decrease in cow slaughter, with dairy cow slaughter down 13.1% and beef cow slaughter down 17.9%, as well as bull slaughter down 8.3% compared to last year. As a result, demand for lean beef from fed carcasses has been stronger in 2024. Increased lean meat demand is also a major driver of increased beef imports, which were up 21.1% year-over-year through September. Total beef production through mid-December was down 0.5% from a year ago but is expected to be about equal to 2023 by the end of the year. says Peel.
Wholesale beef prices came under pressure early last week as buying for the holidays was mostly completed. But the Choice cutout rebounded on Thursday. The national comprehensive cutout (cuts, grinds and trim) the week before last averaged $308.40 per cwt, down $0.31 per cwt from the prior week. The Choice cutout averaged $309.53 per cwt, up $0.91 per cwt. Formula sales represented 57.2% of the total volume of 6930 loads. Spot market sales represented 28.4%, forward sales 16.6% and export sales 9.2%. The first four days last week saw the Choice cutout advance $4.30 per cwt to $320.69 per cwt due to a $5.85 per cwt jump on Thursday. Two holiday-shortened kill weeks will likely boost cutout values, as CBW reports in its next story.
HOLIDAY KILLS WILL BE SMALL
PACKERS last week were buying live cattle for two holiday-shortened weeks, which appeared to limit their activity on the cash market. In addition, margins for fed beef processors remained in the red. They were negative by $44.82 per head the week before last, according to HedgersEdge.com, and were similarly negative last week. Harvest levels during the holiday-shortened weeks might be challenged to exceed 555,000 head per week, lending support to the beef cutout, says Andrew Gottschalk, HedgersEdge.com. .
The week before last saw the 5-area steer price average $194.31 per cwt live, which was the fourth highest weekly price of the year. It increased $3.41 per cwt from the prior week although the reported volume of 62,831 head was moderate only. The dressed price averaged $303.44 per cwt, up $6.23 per cwt from the prior week. Very little cash trade was reported the first three days of last week. A few sales were reported Monday in Iowa-Minnesota at $195.50 per cwt live and on Tuesday there and in Nebraska at $305 per cwt dressed. Kansa sold 551 head Tuesday at $191.50 per cwt live. Trade was somewhat larger up north on Wednesday, with live prices at $194-195.50 per cwt and dressed prices at $304-308 per cwt. The only trade down south was in Kansas at $191 per cwt live or $305 per cwt dressed. Thursday morning saw a further light trade at similar prices. Texas reported no cash trade.
TYSON EXECS GET BIGGER BONUSES
TYSON Foods’ top five executives shared $14.439M in cash bonus pay as a reward for the company’s much improved financial performance in fiscal 2024. Bonuses tied to such performance in the previous totaled $1.032M. Board chairman John H. Tyson earned a base salary of $1.212M last year, the same salary since 2022. His stock awards, which are based on company performance, totaled $7.569M, along with options valued at $1.681M, a cash performance bonus of $4.13M and other compensation worth $3.81M, for total compensation valued at $18.404M, up 108% from the prior year. Donnie King, CEO for the past three and half years, received a 3.99% salary increase to $1.452M in fiscal 2024. His bonus performance pay totaled $5.996M, up from $435,000 a year ago. Stock awards totaled $11.676M, and options awards were $3.082M. His other compensation added $564,643 to mean total compensation of $22.773M last year, a gain of 72.78% over fiscal 2023.
FAMILY FARMS DOMINATE
FAMILY-owned farms continue to dominate U.S. agriculture. They accounted for 96% of all farms and 83% of total agricultural production in 2023. Small family farms with a gross cash farm income (GCFI) under $350,000 made up 86% of all farms but contributed 17% of total production value. Large-scale family farms (GCFI over $1M) dominated production, contributing 48% of total value and 31% of agricultural land. Large-scale family farms led in cash grains, soybeans, cotton, dairy and specialty crops. Small farms excelled in hay (45%), poultry and eggs (46%) and beef production (22%). Non-family farms increased their beef production share from 11% in 2022 to 26% in 2023.
These numbers come from the 2024 USDA Economic Research Service (ERS) report, “America’s Farms and Ranches at a Glance.” The report provides a detailed look at the role family farms play in the U.S. agricultural landscape. With data from the 2023 Agricultural Resource Management Survey, the report sheds light on farm demographics, production trends, financial challenges and the adoption of new technologies, says ERS.
Over half of small family farms in 2023 operated with a high-risk profit margin (below 10%), while large-scale farms were more likely to have low-risk margins (above 25%), says ERS. Credit use declined slightly, with 28% of farms relying on loans compared to a ten-year average of 31%. Only 24% of farms received government payments in 2023. Small farms were the primary recipients of Conservation Reserve Program (CRP) payments, accounting for 76%. Large farms received 71% of countercyclical payments such as Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC), says ERS.
FARM INCOME WILL FALL $9.5B
NET farm income, which USDA calls a broad measure of profits, is forecast at $140.7 billion in 2024, a decrease of $6.0 billion or 4.1% relative to 2023 in nominal (not adjusted for inflation) dollars. After adjusting for inflation, net farm income is forecast to decrease $9.5 billion or 6.3% in 2024 relative to 2023. Despite this expected decline, net farm income in 2024 would be 15.9% above its 20-year average (2004–2023) of $121.4 billion, says USDA’s Economic Research Service (ERS).
ERS forecasts net cash farm income at $158.8 billion in 2024, a decrease of $1.8 billion or 1.1% relative to 2023 in nominal dollars. When adjusted for inflation, 2024 net cash farm income is forecast to decrease by $5.7 billion or 3.5% from 2023, it says. In 2024, net cash farm income is forecast to be 9.8% above its 2004–2023 average of $144.7 billion. Net cash farm income encompasses cash receipts from farming and cash farm-related income (including federal government payments), minus cash expenses. It does not include noncash items (including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings) reflected in the net farm income measure.
Cash receipts from the sale of agricultural commodities are forecast to decrease by $4.0 billion (0.8% in nominal terms) from 2023 to $516.9 billion in 2024, says ERS. Total crop receipts are expected to decrease by $25.0 billion or 9.2% from 2023, led by lower receipts for corn and soybeans. In contrast, total animal/animal product receipts are expected to increase by $21.0 billion or 8.4%, following increases in receipts for cattle/calves, eggs, milk, broilers, and hogs.
Direct government payments are forecast to fall by $1.7 billion or 13.6% from 2023 to $10.6 billion in 2024, says ERS. This decrease is expected largely because of lower Dairy Margin Coverage Program payments and lower supplemental and ad hoc disaster assistance in 2024 relative to 2023. Total production expenses, including operator dwelling expenses, are forecast to decrease by $8.0 billion or 1.7% to $453.9 billion in 2024. Feed, fertilizer (including lime and soil conditioners) and pesticide expenses are expected to see the largest declines in 2024, says ERS.
Average Farm Income Will Fall 3.2%
The average net cash farm income for farm businesses is forecast to decrease 3.2% from 2023 to $112,900 per farm in 2024 in nominal terms, says ERS. Farm businesses are farms with annual gross cash farm income (GCFI), annual income before expenses, of at least $350,000 or operations with less than $350,000 in annual GCFI but that report farming as the operator’s primary occupation. Four out of nine ERS Farm Resource Regions are expected to see average net cash farm income fall in 2024 relative to 2023, with farm businesses located in the Heartland region expected to see the largest dollar decline, says ERS.
When grouped by commodity specialization, all farm businesses specializing in crops are forecast to see lower average net cash income in 2024, says ERS. Conversely, those specializing in animal/animal products are forecast to see higher net cash farm income in 2024. Farms specializing in wheat are expected to see the largest percentage decline and those specializing in dairy are expected to see the largest percentage increase relative to 2023. Median total farm household income is forecast to increase by 2.7% or 0.2% after inflation in 2024 to $100,634 from $97,984 in 2023. Many farm households primarily rely on off-farm income, says ERS. Median off-farm income is forecast at $82,775, an increase of 3.6% (1.1% after inflation) relative to 2023.
Farm sector equity is expected to increase by 5.2% to $181.9 billion from 2023 to $3.68 trillion in 2024 in nominal terms, says ERS. Farm sector assets are forecast to increase 5.1% or $205.4 billion to $4.22 trillion in 2024, following expected increases in the value of farm real estate assets. Farm sector debt is forecast to increase 4.5% or $23.5 billion to $542.5 billion in 2024. The debt-to-asset level for the sector is forecast to improve modestly from 12.93% in 2023 to 12.86% in 2024. Working capital is forecast to fall 6.9% in 2024 relative to 2023, says ERS.
USDA OUTLINES NEW RULE REASONS
USDA outlines its reasons for wanting to introduce new rules under the Packers and Stockyards Act on price discovery in cattle markets. Over the last 40 years, concentration in retail and distribution markets and among meatpackers has dramatically increased, and the number of livestock producers has declined, it says in a new report. Producers, smaller processors and independent retailers have increasingly complained that they are being shut out of markets across the meat supply chain. Following a multi-year effort to better understand these markets and the potential problems existing within them, the report concludes that current practices existing within the meat merchandising industry warrant a renewed focus on enforcement of existing laws, says USDA.
Specifically, a few large packers, distributors and retailers account for an increasingly large share of meat sales throughout the supply chain and as a result determine the terms of competition in retail meat markets, says USDA. According to USDA interviewees, these intermediaries may require the businesses and consumers dependent on them to pay a range of fees and other costs that may cut meaningfully into operating budgets, be too high for new businesses to enter or are otherwise required in a manner that favors incumbency. Also, according to interviewees, these large intermediaries may offer better pricing and terms to certain intermediaries than others. History indicates that these costs and competitive barriers are not preordained, says USDA.
From 1921 to the early 1980s, the federal government more vigorously regulated the merchandising of meat from packing through to retail meat merchandising, says USDA. The period was characterized by robust competition and market access for smaller producers, meat processors and retailers alike. P&S Act regulation and enforcement reflected its connections to two other acts. The P&S Act regulated meat merchandising markets from packers processing meat to the distributor, retailer and retail consumer to protect against unfair, deceptive and unduly preferential practices. In practical terms, this meant USDA brought cases against price discrimination, false advertising and other impermissible practices during this time. Successful enforcement encouraged market participants to compete on price, innovation and internal expansion, and to exercise caution when considering their deployment of potentially illegal conduct, says USDA.
Policies Prioritized Efficiency
Beginning in the 1980s however, policies prioritized efficiency and leveraging scale in the short-term, even if in the longer run the change to a more consolidated market structure led to inefficiencies, says USDA. The Justice Department and the Federal Trade Commission prioritized other areas of enforcement than meat and abandoned enforcement of the Robinson-Patman Act almost entirely. USDA also reduced its P&S Act enforcement in meat merchandising. Thus, meat markets became more concentrated due to a series of mergers and potentially anticompetitive conduct rose during this time, says USDA.
The prevailing view was largely that bigger firms would invariably lead to more efficiencies, which in turn would lower consumer prices, says USDA. The values of resiliency, consumer-driven economics, rural economic and social vitality and long-term sustainability of competition were a lower priority. Since 1974, the number of U.S. cattle, hog, and broiler farms declined by approximately 1.2M or 59%. As smaller producers, food processing and retail businesses exited, the remaining food supply chain was more concentrated and vulnerable to shocks such as the COVID-19 pandemic, says USDA.
The concentrated supply chain was also less competitively nimble in quickly bringing down ensuing grocery price inflation once those initial supply constraints eased, says USDA. For example, when the largest meat processing plants shut or slowed down due to worker outbreaks of COVID-19, livestock prices collapsed while poultry and hog growers faced major economic costs from depopulation or reduced flock placements. Meat prices then quickly became the largest contributor to cost growth in food in 2020–2021, says USDA.