US beef market resilient ahead of July 4 holiday, as industry grapples with Scope 3 reporting

Rabo AgriFinance outlined the current state of the global beef market in its second-quarter report. Overall, cattle prices “are seeing new record-high prices in the US and Canada” at the same time that the “cow herd is entering into a stage of continued contraction,” Zimmerman said.

Despite cow and bull slaughter being down, carcass weights “have been up considerably due to genetic improvement [and] due to cheaper feed prices,” he said. Additionally, the US beef market increased imports by double-digits in the last 12 months, including increased imports from Australia, he added.   

“When we look at where we are going today, compared to 2014, US beef production now is only up about 3%, where at its peak, it was up much closer to 10-15% over those 2014 levels,” Zimmerman said. “As that happens, we are going to eat away at the global beef supply just simply because the declines in the US will be too great for all the other countries to fill that gap.”  

Looking ahead, Rabo AgriFinance predicts global beef production for Q3 and Q4 to be down year-on-year due to declines in Europe and the US, despite increases in Australia and Brazil beef production.

‘Beef demand right now has remained very robust’

Despite the challenges, "beef demand right now has remained very robust," and US consumers are likely to accept price increases that come down from food CPG companies for several reasons, including being in the middle of peak grilling season, Zimmerman said. 

Even in uncertain economic times, shoppers have stuck with the beef category but found ways to trade down within the category, including from steaks to hamburgers or simply going down a grade of meat, he added. 

"Through all of that, they have not really stepped away from beef, maybe they traded down within the category. Or if they did not trade down, ... they have traded down from restaurants to retail," Zimmerman said.

Additionally, the US beef industry should also see strong demand during the upcoming July 4 holiday, and retailers are catering to value-minded consumers and those seeking convenience with prepared items, like kebabs, he added. 

“One thing that was very apparent during Memorial Day weekend, and even the week after, is retailers are being very aggressive in their pricing of feature ads and trying to be aggressive and offering unique items for consumers to find value. ... If there is one thing that the pandemic taught us, it is that we love social opportunities and engagement, and we have a lot of equipment at our disposal to host barbecues and host backyard events. And so, for the consumer looking for beef to put on the menu at this time of year, there is opportunity,” he added.

Beef producers re-evaluate sustainability commitments amid Scope 3 challenges

The beef industry is struggling to implement changes to improve ESG reporting and boost sustainable farming practices, Zimmerman said.  

Typically, beef producers can report on Scopes 1 and 2 greenhouse gas emissions — emissions created directly from an organization and those created indirectly from an organization, respectively, Zimmerman explained.

However, beef producers are still figuring out how to accurately report on Scope 3 emissions — the ones that an organization is indirectly responsible for — which can often be out of a producer's control, he said. The lack of ESG standardization across markets is also creating additional challenges, he added.

Recently, the U.S. Securities and Exchange Commission rolled back its​ Scope 3 requirements for companies due to these challenges, Zimmerman noted.

Beyond the reporting challenges, farmers, governmental agencies and supply-chain stakeholders must develop a system of reporting on sustainability metrics without creating an onerous financial burden for farmers, Zimmerman said. Farmer protests in Europe broke out earlier this year, spurred by farmers' objections to some sustainability reporting requirements.

“If measurement and quantification of some [farming] practices are being asked of them, that has to be done in a way that, one, is not a waste of their time, but two, is not going to financially cause them to be inoperable down the road. What we are asking of them for environmental and social reasons also has to be economically viable for them, and so I think that is really the tension that everybody within the food system is trying to live within and navigate appropriately,” Zimmerman said.

‘The US government tries to utilize policy as a solution, not policy as a punishment’

Despite the ESG reporting challenges, the US government is helping beef producers and farmers "facilitate through the pain point that exists" with Climate-Smart Commodity grants, Zimmerman explained.

Revealed in February 2022, the USDA's Partnerships for Climate-Smart Commodities​ provides financial assistance to support the production and marketing of climate-smart commodities. The USDA provided $3.03 billion in funding for more than 135 projects across 102 major commodities, including beef and beef by-products, according to the Partnerships for Climate-Smart Commodities Projects dashboard​.

“The US government tries to utilize policy as a solution, not policy as a punishment tool. And so, what you see is the Climate Smart Commodity grants that have been championed by the USDA are really an embodiment of that. The government is saying, ‘Hey, we are going to leverage tax dollars. We are going to leverage these grants towards creating solutions to get us where we need to be to meet these SBTI commitments ... so submit a proposal, partner with producers, partner with food companies and all the different players in between and let's leverage those dollars to eliminate pain points.’”