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Weighing the market-Dec. 9, 2022

published: December 9th 2022
by: Wes Ishmael
source: Southern Livestock Standard

Prices Rise with Declining Cattle Numbers


Although beef production for this year is record large, demand and narrowing supplies are helped push negotiated cash fed cattle prices to $150.00/cwt. or more in all regions by the second week of November.


“The price of beef at all levels is expected to be supported the next few years as the domestic beef supply is expected to decline due to fewer breeding females,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his late-November market comments. “However, if inflation slows or consumers transition discretionary spending away from beef, then those factors will pressure prices lower.”


USDA’s Economic Research Service (ERS) increased the forecast annual fed steer price for this year and next, in the latest World Agricultural Supply and Demand Estimates (WASDE).


ERS projected the annual average five-area direct fed steer price for this year $1 higher than the previous month at $144.15/cwt., with the fourth-quarter average at $152.00. The forecast average annual price for next year was $2 higher $156. For 2023, prices were forecast at $153 in the first quarter, $154 in the second quarter and $155 in the third. Price increases were based on stronger expected demand.


ERS increased estimated beef production for this year slightly to 28.35 billion lbs. Beef production next year was forecast at 26.27 billion lbs., which would be 2.1 billion lbs. less (-7.3%) than this year.


Calf Prices Sideways


High feed costs continued to cap calf and feeder cattle prices through most of November. However, prices were showing signs of lift heading into December, helped along by looming smaller supplies and recent rains that supported forage and wheat pasture growth in some areas.


USDA’s Economic Research Service (ERS) increased expected feeder steer prices (750-800 lbs., Oklahoma City) for the fourth quarter of this year and the first quarter of next year, in the November Livestock, Dairy and Poultry Outlook.


“Despite higher operating costs, firm feedlot demand is expected for the remainder of 2022, and with current price data the fourth-quarter 2022 price forecast for feeder steers is raised $3 to $176/cwt.,” say ERS analysts. “Based on current price strength, the price projection in first-quarter 2023 is raised $2 to $177. However, expected feeder calf prices were unchanged for the remainder of the year.”


ERS projects next year’s feeder steer prices to be $190 in the second quarter and $214 in the third quarter for an annual average price of $201.25. This year’s estimated annual price is $165.68


Beef Cow Liquidation Appears Historically Steep


Year-to-date beef cow and beef heifer slaughter represent the steepest decline of female beef cattle inventories in more than three decades, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his late-November market comments.


Specifically, beef cow slaughter was up 12.3% year over year, according to Peel. “If beef cow slaughter were to decline to equal year-ago levels for the remaining weeks of the year, total beef cow slaughter for the year would be up 10.5% year over year,” he explains. “This would be a net beef cow herd culling rate of 13.1% for the year, a new record level. The actual culling rate is likely to be a little higher.”


At the time, Peel noted weekly beef cow slaughter had been higher year over year for 70 consecutive weeks.


Beef heifer slaughter remains higher year over year, as well.


“The Oct. 1 quarterly Cattle on Feed report showed that the number of heifers in feedlots was still up 1.7% year over year,” Peel says. “Since that report, weekly heifer slaughter has continued to be up over 4% year over year with the most recent week up 5.8% over the same week one year ago.” 


Continued drought makes it tough to peg how beef cow and heifer slaughter unfold in the next few months.


“It seems likely that many producers have adjusted herd inventories, given hay and feed supplies, to be able get through the winter. This might mean that cow culling will slow down through the winter,” according to Peel. “If La Niña persists next spring, more liquidation can be expected going into the next growing season.”


Early-release tables for USDA's Agricultural Projections report from ERS project the beef cow inventory to be 1.1 million head fewer year over year when the new year begins at about 29 million head. That would be 3.6% less than the same time a year earlier. ERS projects the nation's beef cow herd declining another 387,000 head (-1.3%) to 28.6 million head by Jan. 1, 2024 before rebounding to 29.1 million head Jan. 1, 2025. From there the herd grows slowly to 31.3 million head at the beginning of 2032.


Beef Demand Holds


Domestic beef demand strength continues despite higher retail prices.


The all-fresh retail beef price has remained in a narrow range from $7.37/lb. to $7.25/lb. this year, averaging $7.33/lb. through October, according to Peel, in his mid-November market comments. It was $6.95/lb. during the same period last year.


“Wholesale boxed beef prices, similar to retail prices, have traded in a narrow range for most of 2022,” Peel says. “Since March, Choice boxed beef has averaged $261.77/cwt. with a weekly maximum of 272.48/cwt. and a minimum of $246.31/cwt., leading to a range of $26.17/cwt. This follows very strong wholesale demand in 2021, which led to an average Choice boxed beef price of $279.81/cwt. with a weekly maximum of $347.02/cwt., a minimum of $206.73/cwt. and a range of $140.29/cwt. for the year.”


USDA projects domestic beef production significantly lower next year, which suggests higher beef prices.


“Consumers, thus far, have absorbed large supplies of beef at record prices,” Peel explains. “As beef supplies tighten, some consumers may begin to ‘trade down’ as market prices ration a smaller supply of beef. Per capita beef consumption is expected to decrease in the coming year, not because beef demand is weak but simply because the available supply of beef will decrease.”




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