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Weighing the Market-Feb.17, 2023

published: February 17th 2023
by: Wes Ishmael
source: Southern Livestock Standard

Calf and feeder cattle buyers responded to this winter’s widespread moisture and dwindling cattle supplies, pushing prices mostly higher to sharply higher in recent weeks.


The nation’s cow herd at the beginning of the year was among the smallest in history, according to USDA’s Cattle report.


Specifically, the nation’s beef cow inventory of 28.92 million head was 1.06 million fewer (-3.6%). Beef replacement heifers of 5.16 million head were 317,800 head fewer, down 5.8%. The calculated number of feeder cattle outside of feedlots of 25.27 million head was 722,900 fewer (-2.8%).


Total cattle and calves in the U.S. of 89.27 million head were 2.80 million head fewer (-3.04%).


Kevin Good, CattleFax vice president of industry relations and analysis at CattleFax, says U.S. beef cow cattle inventories have fallen 1.5 million head from cycle highs.


“Drought affected nearly half of the beef cow herd over the last year, exacerbating the liquidation in 2022,” Good explained at the recent CattleFax Outlook Seminar in New Orleans. “Drought improvement and higher cattle prices should drastically slow beef cow culling through 2023.”


Further, low hay stocks could prompt more beef cow liquidation this winter, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in late-January market comments.


Peel points out Dec. 1 hay stocks for the nation were 16.4% less than the previous 10-year average at 71.9 million tons. It was the least on record going back to 1973.


Matt Makens, meteorologist for CattleFax said the latest forecast for La Niña had only a 14% probability this spring and less of a chance by the summer. He explained a neutral phase will take control of the pattern as La Niña weakens and may last several months before giving El Niño a chance to grow this summer and into the fall.


Prices and Leverage Favor Producers


Significant herd culling and dwindling cattle supplies, even before herd rebuilding begins, suggest cattle prices will continue higher for an extended period.


Good forecast the average 2023 fed steer price at $158/cwt., up $13 from 2022, with a range of $150 to $172/cwt. CattleFax projects feeder steers (800 lbs.) to average $195/cwt. with a range of $175 to $215/cwt. Steer calves (550 lbs.) are forecast to average $225/cwt., with a range of $200 to $245/cwt.


“Drought affected nearly half of the beef cow herd over the last year, exacerbating the liquidation in 2022,” Good says. “Drought improvement and higher cattle prices should drastically slow beef cow culling through 2023.”


Good forecast utility cows at an average of $100/cwt. with a range of $75 to $115/cwt. CattleFax projects bred cow prices at an average of $2,100 per head for load lots of quality, running age cows; a range of $1,900 to $2,300.


Likewise, in the January Livestock, Dairy and Poultry Outlook, USDA’s Economic Research Service (ERS) increased projected feeder steer prices (750-800 lbs., Oklahoma City) for the first two quarters of this year, based on more November feedlot placements than expected, and tighter anticipated supplies available for placement early in 2023.


ERS increased the projected first-quarter price by $5 to $182/cwt. and the second-quarter price by $2 to $192. Projected prices are $214 in the third quarter and $224 in the fourth quarter for an annual average of $203.


On the other side of the scale, ERS increased the expected annual five-area direct fed steer price for this year to $159/cwt., in the February World Agricultural Supply and Demand Estimates (WASDE). Prices were forecast to be $158 in the first quarter, $159 in the second quarter, $157 in the third quarter and $162 in the fourth quarter.


Beef Consumers Hang Tough


Despite economic challenges, consumer beef demand remains strong.


“Based on calculations made by the Livestock Marketing Information Center, beef demand in the third and fourth quarter of 2022 declined relative to the previous year. However, the index value for all fresh beef demand in 2022 ranked as the second highest index value since the turn of the century behind 2021,” explained Andrew P. Griffith, agricultural economist at the University of Tennessee, in his mid-February market comments.


Although inflation’s pressure on disposable incomes is a concern, Griffith explained, “The full force of many analysts’ fears has not been realized at the meat counter. This is not to say that those fears will not be realized, but it does support the inclination that maybe those fears are overstated at this time. It is fairly clear the beef supply will decline in coming months, but that does not mean beef prices will skyrocket. What it could mean is that some of the packer margins slip to producers in earlier stages of production.”


Likewise, international demand for U.S. beef remains historically strong. U.S. beef exports set annual records for both volume and value in 2022, according to year-end data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).


“2022 was a ground-breaking year for U.S. beef’s international presence, with global demand stronger than I’ve seen in all my years in the industry,” says Dan Halstrom, USMEF president and CEO. “Late in the year, exports certainly felt the impact of persistent headwinds in our large Asian markets, including depressed trading partner currencies and COVID-related challenges in China, but the long list of countries in which records were set showcases the industry’s focus on diversifying export markets. While the year ahead will be challenging due to supply constraints, the exchange rate situation has improved and we still see room for growth in the foodservice sector as more regions continue their gradual rebound from COVID.”


U.S. beef exports reached 1.47 million metric tons in 2022, up 2% from the previous high in 2021. Export value climbed to a record $11.68 billion, up 10% from 2021 and nearly 40% above the previous five-year average. The U.S. exported a record share of its record-large beef production in 2022, and at higher prices.


Beef export value equated to a record $447.58 per head of fed slaughter in 2022, up 10% from the previous high achieved in 2021.


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