Lower cattle inventory and continued contraction of the beef cattle herd will be the story for the coming year, an economist says.
Lower cattle inventory and continued contraction of the beef cattle herd will be the story for the coming year, an economist says.
High feed costs and widespread drought are driving contraction in the beef cattle herd. But beef production continues to increase even with tighter cattle supplies.
“The beef industry is finding ways to do more with less,” said Brett Wilder, University of Idaho assistant professor and farm business management extension educator.
“A lot of that is due to higher average weights on the process side, but still the story is the same. We’re finding ways to improve production with less inventory,” he said during the university’s Idaho Outlook webinar.
Lower cattle inventory and continued contraction will be the story for the coming year, with 31.1 million beef cattle in regions with drought, he said.
“If we have as much drought as we did this last year, we could see catastrophic levels of contraction,” he said.
That’s not in the forecast, but it’s something to keep an eye on, he said.
Over the last couple of years, the drought has led to extremely high beef cow slaughter. Analysts expect that will lead to a change in the number of cattle on feed in the future. The industry is still working through heavy placements into feedlots, but cattle on feed will get lower and fall below the long-term average, he said.
“That’s when we can tell contraction is really in full swing,” he said.
Even though there’s less cattle out there, the industry is placing more lightweight cattle into feedlots than typical and keeping the cattle on feed number high, he said.
“Those animals are going to be on feed longer, show up on that report longer and take longer to get to the finish line,” he said.
In addition to high beef cow slaughter, higher heifer slaughter will also keep supplies tight. With drought and high input costs, producers aren’t holding back females. Heifer slaughter levels are astronomical, about 210,000 heifers a week — as opposed to the normal 175,000 to 185,000 — and account for about 40% of total slaughter, he said.
In addition, steer slaughter was lower in 2021 and continued to decline in 2022, which means there are fewer animals out there, he said.
Beef exports are also impacting the beef supply picture. Increasing exports are helping hold beef prices high, but they make domestic supplies tight. On the flip side, a strong U.S. dollar is drawing beef imports, especially from South America, and they are expected to increase a lot in 2023 and 2024, he said.
Beef in cold storage is the final piece of the supply story. In general it dips April through August, but that didn’t happen this year. That may have been some speculation of contraction and trying to keep enough supply on hand, he said.
“If it’s any story other than that … this is a bearish sign of the inability to move that product out of cold storage and inability to sell it,” he said.
If beef in cold storage continues to flatline through the end of the year, that would give him confidence that beef is being stored speculatively.
“If that’s not the case and we continue to see cold storage increase then maybe we have something to talk about on the demand side,” he said.
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