Senior commodities editor
It appears cattle prices could be on the move in 2023.
A combination of tightening supplies and strong demand for beef will likely pressure the market through a multi-year shift in the cattle cycle.
“The beef side still shows a tightening (supply) environment, especially as we get into Q2, Q3 and beyond,” said Rich Nelson, chief strategist for Allendale Inc., who believes beef output could decline by 4% in 2023 compared to 2022.
“The overall pricing situation has a lot of us wondering – how high will the story be for prices?”
USDA recently forecast steer prices could average $156 per hundredweight in 2023. If realized, that would be up significantly from the projected averages of $144.15 in 2022 and $122.40 in 2021.
The market pressure stems in part from a tightening supply of cattle.
USDA’s monthly cattle on feed report pegged the number of cattle and calves on feed for the slaughter market at 11.67 million head on Dec. 1, down 3% from the previous year. Placements in feedlots totaled 1.93 million head in November, down 2% from a year ago.
“The trade was slightly disappointed by the fact November placements were down about 2% from the previous year,” Nelson told FarmWeek. “The market had been looking at about a 4% year-over-year decline.
“But, overall, it’s still a positive discussion on cattle,” he continued. “We now have three months in a row of lower-than- last-year placements. We are confirming the 2023 supply picture is the changing supply picture that probably will be in place through 2026.”
The shrinking supply of cattle was driven mostly by the multi-year drought in key cattle producing areas of the country, along with skyrocketing feed costs.
“We’ve got four years behind us of continued liquidation of the breeding herd,” Nelson said. “So far, we haven’t seen those beef cow culling numbers drop off, yet.We’re pretty much set for three years ahead with lower supplies,” he noted. “Even if the drought ends or producers react to the strong (price) environment and there is (herd) expansion, that means in year one or year two when we hold females back, we’ll actually see a tighter beef supply offered, at least short term.”
If cattle supplies continue to tighten and beef demand remains strong, markets will face ongoing pressure.
“There has been a light pushback by consumers against high retail (price) levels,” said Nelson, who noted beef demand still remains above pre-pandemic levels. “We’re still looking at active consumer interest (in beef purchases) as a whole.”
In the first 10 months of 2022, beef export value increased 18% from the 2021 record pace to reach $10.05 billion – topping $10 billion in a year for only the second time, according to the U.S. Meat Export Federation. Beef export volume from January through October totaled 1.25 million metric tons, up 4% from the previous year.
Class III and IV milk prices, which averaged above $21 in ’22, recently slipped to the $18-range.
Senior commodities editor
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