Beef Demand: The Unstoppable Force or the Impending Doom?

Industry ExpressFriday, May 23, 2025 3:50 pm ET
2min read
Memorial Day is upon us, and with it comes the unofficial kick-off to summer and grilling season. But this year, there's more at stake than just backyard barbecues. The demand for beef is at an all-time high, even as prices soar to record levels. So, what's driving this demand, and how long can it last in the face of economic uncertainty? Let's dive in and find out!

WHAT'S FUELING THIS BEEF BOOM?

Demand is the amount of a product consumers will purchase over a range of prices. In the beef market, it's all about consumers' financial ability and willingness to buy beef over other animal proteins. And right now, that willingness is through the roof! Strong demand usually leads to higher retail prices, which means higher prices paid for wholesale, fed cattle, feeder cattle, and even new calves. But here's the kicker: cattle supplies are at a 74-year low. So, while tight supplies have been a major factor driving up prices, demand is the other part of the equation. With the supply side largely fixed, U.S. demand for beef is the lynchpin holding together razor-thin profit margins for our nation’s cattle farmers and ranchers. If demand weakens, cattle prices will likely decline, creating a major obstacle to any meaningful expansion of the U.S. cattle herd.

HOW DO WE MEASURE THIS DEMAND?

Measuring demand can be tricky, but the USDA has some tools to help. One of the foundational tools is the USDA National Agricultural Statistics Service’s (NASS) monthly World Agricultural Supply and Demand Estimates (WASDE). In the May WASDE report, USDA estimated that 2025 consumption of beef will be 28.91 billion pounds. This forecast is down about 49 million or 1.4% from last month and down just 0.5% from last year. This means USDA is forecasting a minimal slowdown in beef consumption compared to last year. This forecast predicts strong demand through 2025.

EXPORT DEMAND IS SLOWING, BUT DON'T PANIC YET!

Exports to other countries are a critical part of demand because they add value to nearly all players in the supply chain. The U.S. exported 1.29 million metric tons of beef in 2024 worth almost $10.5 billion. But export demand has been slower in 2025. So far, the U.S. has accumulated 277.6 thousand metric tons of beef export sales this year, nearly 22% less than the same time in 2024. While exports to countries like South Korea and Canada have remained strong, tariffs have slowed sales down, particularly to China. Total export sales to China are currently 32% behind 2024. But don't panic yet! This could be a temporary setback, and the long-term outlook for beef exports remains strong.

THE CHOICE-SELECT SPREAD: A WARNING SIGN OR A BUYING OPPORTUNITY?

Another gauge of consumer demand for beef is the difference between the cutout value for choice grade and select grade beef. Choice grade beef is a premium product compared to select grade. When the difference between the two is greater than $10-$15, it can be an indicator of strong demand because consumers are more willing to pay for a premium product. A narrowing spread, on the other hand, can indicate softening demand for premium cuts or reduced availability of Select-grade beef. The choice-select spread has fallen from $18.89 on May 1 to $10.10 per cwt on May 16. During this time, the cutout value for select beef grew 5.6%, much faster than the price of choice grade which grew by 2.7% in the same time. This shift may reflect tighter supplies of Select beef rather than weakening overall demand, as consumers appear willing to continue purchasing both grades at elevated prices.

SO, WHAT DOES THIS ALL MEAN FOR YOU?

As an investor, you need to stay on top of these trends. Beef demand is strong, but it's not immune to economic uncertainty. Keep an eye on export demand and the choice-select spread. And remember, the market hates uncertainty! So, stay informed, stay nimble, and stay ahead of the curve. This is a no-brainer!

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