YEAREND: As drought tightened cattle production, 2023 markets soared

LITTLE ROCK — Cattle market prices are as high as they’ve been in a decade. That’s good news for producers who have been able to maintain their herds in recent years, but a missed opportunity for those who weren’t.

HIGH DOLLAR — “It was an exciting year in terms of markets for cattle,” said the Division of Agriculture's James Mitchell said. “Cattle prices leading up to the fall were as high as we’ve seen them in 10 years — that had lots of people excited about the future. On the production side, it was exciting depending on who you asked.” (Image courtesy USDA.) 

Throughout most of the year, both futures and cash markets for steers, calves and more marked a vast improvement over 2022. By the last week of November, prices for medium and large No. 1 steer calves (weighing 500 to 600 pounds) were above $270 per hundredweight, more than $80 per hundredweight higher than the same time in 2022 and more than $100 higher than the average from 2017-2021.

James Mitchell, assistant professor and extension economist in the Department of Agricultural Economics and Agribusiness at the University of Arkansas System Division of Agriculture, said that the benefits of high prices largely fell to those with access to good grazing and forage.

“It was an exciting year in terms of markets for cattle,” Mitchell said. “Cattle prices leading up to the fall were as high as we’ve seen them in 10 years — that had lots of people excited about the future. On the production side, it was exciting depending on who you asked.” 

A wide swath of droughty conditions has made its way down the middle of the United States over the last several years — affecting first the Northern Plains states such as Montana and Idaho in 2021-2022, then the Southern Plains of Kansas and Texas and finally the Southeast in 2023.

“About three-quarters of Arkansas was heavily affected,” Mitchell said. “The southeastern United States has been hit incredibly hard by drought. All of our neighbors to the east — Tennessee, Mississippi, Alabama, Georgia, Kentucky, Florida — are in a pretty tough spot, still very much in a drought. So for them, there’s not much they can do with these high prices, because they don’t have any grass or forage. There was nothing they could really do this winter, in terms of retaining calves.

“So you’ve got significant portions of cattle-producing states suffering through drought, forcing them to shrink or liquidate their herds because of a lack of forage,” he said. “When you have three consecutive years of that, you’re going to have a tightening of beef cow availability, which means you’ve got fewer calves being born each year. So you have tighter and tighter supplies, which of course leads to higher prices — assuming demand holds steady.”

In January, the U.S. Department of Agriculture reported that the total U.S. beef cattle inventory was at its lowest since 1962, declining more than 3 percent from the previous year to 28.9 million head. The inventory reported an entire cattle inventory of 89.3 million. Mitchell said he believes the forthcoming USDA Cattle Inventory report, expected in January 2024, will reflect a fourth consecutive year of contracting cattle supply in the United States.

Of course, there’s almost nothing that can’t price itself out of the market. At a certain point, Mitchell said, consumer resiliency will give way to more competitive pricing for — in this case — other animal proteins, such as poultry, pork and fish.

“People consume less of something when it gets more expensive — it’s just a law of economics,” he said.

Mitchell said that rebuilding the country’s beef cattle inventory will be a multi-year process — one that can’t really even begin under the persistence of drought.

“Pastures are going to have to recover before we see any discussion of expanding cattle numbers,” he said. “Even if that does occur, it’s going to take a couple of years for that expansion to be noticed. We don’t have the cows; it’s going to take a year to develop heifers, another year for them to give us calves, and so on. So we’re looking at a few more years of declining cattle numbers.

“An important thing that’s different from 2014-2015, is that it’s going to be more expensive to buy back in and expand herds,” Mitchell said. “Interest rates are higher than they were 10 years ago. We expanded the herds very rapidly in 2014, we did that with low interest rates — so capital was inexpensive. That should lead to more careful calculation in terms of how we decide to expand herds.”

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on X and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu/. Follow on X at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on X at @AgInArk.

While cattle prices continue to rise, high production costs, inflation undercut profits

By Ryan McGeeney
U of A System Division of Agriculture

LITTLE ROCK — It’s true: Cattle market prices are at what some analysts have called “historic highs.” Unfortunately, profits are not.

FLYING HIGH — For the entirety of 2023, slaughtered steer prices across all U.S. markets have remained above those of the previous year by 20-30 cwt, ranging from $155 to $170, and practically soared above the 2017-2021 average by 40 cwt or more. According to recent data from the U.S. Department of Agriculture, fed steer prices reached above $175 cwt last week, topping the 2014-2015 record of about $172. 

For the entirety of 2023, slaughtered steer prices across all U.S. markets have remained above those of the previous year by 20-30 cwt, ranging from $155 to $170, and practically soared above the 2017-2021 average by 40 cwt or more. According to recent data from the U.S. Department of Agriculture, fed steer prices reached above $175 cwt last week, topping the 2014-2015 record of about $172.

But of course, a dollar in 2023 is not what it was in 2014. According to the U.S. Bureau of Labor Statistics, inflation during those nine years has reduced the value of a dollar spent in the consumer price index by 28 cents.

James Mitchell, extension livestock economist for the University of Arkansas System Division of Agriculture, said inflation is just one reason to keep today’s market prices in perspective.

“I wouldn’t say we’re near ‘record territory,’” Mitchell said. “I’d say we have prices as high as we’ve seen in the last 10 years in nominal terms — which is still great. You have to be careful how you interpret that, however.”

Mitchell also emphasized that the cattle industry, as a whole, abides by a cyclical nature.

“We’ve had three, four consecutive years of liquidating cow herds, of tighter and tighter feeder cattle supplies, and that’s driven significantly higher,” he said. But producers shouldn’t expect that upward trend to continue indefinitely.

For cattle producers in the U.S. Southeast and elsewhere, 2014-2015 was an unforgettable season, for reasons both good and bad. Prices spiked to record highs at the end of 2014, owing largely to market demand, at a time when feed, fuel and other input prices remained relatively low. When supply began catching up, however, market competition pulled the floor out from beneath those prices, leaving many producers with larger herds they had to either maintain or sell off at much-lower-than-anticipated prices.

Mitchell said that today’s high input prices, while largely the bane of many producers’ existence, will at least help sustain the cattle market prices.

“All the inputs are much higher than they were 10 years ago,” he said. “Corn is still high, fertilizer is still high, fuel is still high. So, because profitability hasn’t moved up as high as prices have, I do think we’re going to see prices stay high for a more prolonged period amount of time. When we got into the fall of 2015, it seemed like prices just fell out from under us, and we continued along that path for the next couple of years.”

As always, spring and summer weather will play the wild card in cattle production. While Arkansas has seen a fairly wet few months, that augers nothing for the summer, when rainfall will be more critical for providing grazing material to livestock.

“We’ve been pretty fortunate in Arkansas, but I’d argue that moisture really doesn’t matter now as much as it does in the next few months,” Mitchell said. “We need timely, adequate rainfall through the spring and summer, when it matters most for both forage production and hay production. It doesn’t matter a whole lot if we’ve got rain in February and March.”

Even if Arkansas does see a dry summer, the state’s cattle producers still have a lead on some neighboring states that have dwelled in the doldrums of drought for more than a year now.

“We still have two of our biggest cattle states, Oklahoma and Texas, that are still very much in drought, so that’s limiting the options for a lot of those producers,” Mitchell said. “Kansas is in even more of a severe drought scenario.

“The prices may be high, but if we don’t have grass to feed cattle, there’s nothing we can do about it,” he said.

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on Twitter and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu/. Follow on Twitter at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on Twitter at @AgInArk.

Beef cattle inventories drop to lowest levels in more than half century

by George Jared (gjared@talkbusiness.net)

Beef cattle inventories across the United States are at their lowest level in more than six decades, according to the U.S. Department of Agriculture (USDA). Rising demand will mean long-term price hikes for consumers.

In its biannual cattle report, USDA reported a total of 89.3 million head as of Jan. 1, about 3% lower than the total reported a year ago, and the lowest since 2015. Beef cattle, bred specifically for slaughter and meat sales, declined 3.6%, to 28.9 million head, the lowest total recorded by the agency since 1962.

In “Cattle Market Notes Weekly,” a newsletter focused on the cattle industry, University of Kentucky’s Kenny Burdine and James Mitchell, extension livestock economist for the University of Arkansas System Division of Agriculture, said the decline came as no surprise.

https://talkbusiness.net/2023/02/beef-cattle-inventories-drop-to-lowest-levels-in-more-than-half-century/

U.S. beef cattle inventory lowest since 1962

By Ryan McGeeney
U of A System Division of Agriculture 

LITTLE ROCK — Beef cattle inventories across the United States are at their lowest point in more than six decades, according to the U.S. Department of Agriculture.

STEEP DECLINE — In its bi-annual cattle report, USDA reported a total of 89.3 million head as of Jan. 1, 2023 — 3 percent lower than the total reported a year ago, and the lowest since 2015. Beef cattle — those bred specifically for slaughter and meat sales — declined 3.6 percent, to 28.9 million head, the lowest total recorded by the agency since 1962. (USDA graphic.)

In its biannual cattle report, USDA reported a total of 89.3 million head as of Jan. 1, 2023 — 3 percent lower than the total reported a year ago, and the lowest since 2015. Beef cattle — those bred specifically for slaughter and meat sales — declined 3.6 percent, to 28.9 million head, the lowest total recorded by the agency since 1962.

In “Cattle Market Notes Weekly,” a newsletter focused on the cattle industry, University of Kentucky’s Kenny Burdine and James Mitchell, extension livestock economist for the University of Arkansas System Division of Agriculture, wrote this week that the decline came as no surprise.

“There was no question that the beef cow herd had gotten smaller,” Burdine and Mitchell said. It was “just a question of how much smaller.”

For many producers throughout the country, 2022 had offered a perfect storm of economic and weather-related challenges: input costs such as diesel and fertilizer doubling or even tripling, and a hot, dry summer that only increased reliance on groundwater in the absence of rainfall. For cattle producers in particular, drought conditions offered no replenishment of dwindling forage supplies, leaving many producers to cull deeper into their herds than they might have otherwise preferred. Elevated beef cull prices contributed to an 11 percent increase in beef cow slaughter, according to USDA.

As Mitchell recently pointed out, however, the reduced supply combined with steady demand from the U.S. consumer at least meant greater profitability for those producers with stock to sell.

“There is a pretty substantial biological lag in the beef supply chain,” he said. “What consumers experience at the grocery store is a product of what cattle producers were going through a year or two ago. It takes about two years for a new calf to become the steak on your dinner plate.

“To the extent that we’ve got historically low cattle stocks today, that will lead to tighter cattle production, which means potentially higher beef prices,” Mitchell said. “From the perspective of cattle producers, this also means higher prices. The recent report from USDA just reinforces a bullish outlook on cattle prices for the next couple of years.”

The downward trend in cattle production does not appear likely to reverse itself in 2023. According to USDA’s cattle-on-feed data, the number of cows on feed as of Jan. 1 fell 4 percent from 2022 numbers, to about 14.2 million, marking the first year-over-year decline in beef production in eight years, Burdine and Mitchell wrote.

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on Twitter and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu/. Follow on Twitter at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on Twitter at @AgInArk.