CattleFax, a global leader in beef industry research and analysis, had experts present their annual Protein and Grain Outlook at the recent Cattle Industry Convention in New Orleans. The session was jump-started by Pono Von Holt, president of CattleFax.
“The markets have been emotional – a grind for every business segment,” he said. “It’s imperative the industry continues to embrace new technology. We need to create a long-term plan. We need to adapt and respond to the cattle market’s needs.”
Starting with the protein side of the presentation was Randy Blach, CEO of CattleFax, who said we’re “moving back into balance between supply and demand, but price advances have been tighter with feeder cattle and calves.” The big issue over the last few years has been drought – and its impact on grain production. Blach also noted the nation’s cow herd is substantially smaller than original 2023 forecasts (with the smallest cattle supply since 2015).
However, producers saw their highest cattle prices in years in 2022. “As reduced cattle numbers and beef production continue to unfold, prices and profitability will again favor cattle producers in 2023,” Blach said. “The much-needed improvement to profitability at the cow-calf level will be vital to ensuring the long-term health of the cattle and beef industry.”
Looking back at 2022, there was a peak in cyclical slaughter and production patterns. A leverage shift continued as producer share improved, but “economic headwinds are still circling.”
There was both good and bad news: shipping bottlenecks have improved dramatically, but interest costs (and fuel costs) have become a significant factor. Fed cattle prices have moved $62/cwt. above the COVID 2020 lows and 800-lb. feeder steers are $66/cwt. above their COVID lows.
Economically, inflation remains high. Beef demand remains inversely tied to the unemployment rate – it’s possible that as the unemployment rate goes up, beef demand will drop. Unemployment will go up this year; it ended 2022 at 3.7% but may increase as high as 5.5% in 2023.
As for cattle supply and demand, Kevin Good, vice president of industry relations at CattleFax, noted that the industry came out of 2022 with record beef production and record high retail prices, even though the number of cattle is down.
“It’s efficiency and sustainability,” Good said. “So how do we build this herd back up?”
He said they are projecting 735,000 cattle for slaughter for 2023, with some slight liquidation continuing. Good is predicting beef cow inventory to be even smaller in 2024.
The dairy industry is a much bigger part of the beef industry today, however. “Beef-dairy crosses are a big game changer – they’re up about 500,000 in the past year based on semen sales,” Good said. “This is a win-win and a slow march into bigger supplies.”
CattleFax is forecasting total slaughter to be 33 million head in 2023 (down 1.6 million head or 4.7% from 2022), with fed slaughter at 25.8 million head (down 800,000 or 3%) and non-fed slaughter at 6.9 million head (down 800,000 or 10.5%).
The average carcass weight will be 1.5 pounds heavier, and total beef production will be at 27 billion pounds, down 1.3 billion pounds or 4.6% from 2022. The decline in production will lead to a 2.2-pound decline in net beef supply to 57 pounds/person.
“This is a ‘huge drop’ in production so we may see higher imports,” Good noted.
For the pricing outlook, all-fresh beef will retail around $7.35/lb. (up four cents); fed steers will be $158/cwt. (up $14); 800-lb. steers will be$200/cwt. (up $29); utility cows will be $100/cwt. (up $20); and bred cows will fetch $2,100/head (up $300).
Other things to keep an eye on are a continued demand for quality, as 2022 saw record premiums for Prime, Certified Angus Beef and other high end products. Exports are expected to decline, but tighter global protein supplies should continue to support the U.S. red meat market this year.
As for the grain outlook, corn might be a bit tight in 2023. On the supply side, harvested corn acres were down 6.2 million to 79.2 million last year, with a yield of 173.3 bushels/acre. Production equaled 13.7 billion bushels, down 200 million versus the year before.
On the demand side, exports are expected to decline, as there was a big crop in Brazil and China’s production is increasing. The global supply is adequate to meet global demand.
For ethanol, demand is slow in part due to fuel prices and remote workers. Demand for feed and residuals is lower due to declining cattle supplies, a stable hog population, but poultry is seeing a slight increase.
Current corn stocks-to-use are just under 9% and will continue to support the market above $6/bushel and provide resistance near $7.50/bushel into summer, with a yearly average price of $6.50/bushel expected.
In general, stocks-to-use will remain mostly unchanged into the end of the crop year; the price will also stay mostly stable. Farmers may see a spike in spring if cool temperatures lead to delays in planting.
And as for hay: 2022 had lowest U.S. hay production levels since the 1959. On-farm hay stocks were at just 71.9 million tons on Dec. 1 – but since 2000, cattle inventory is also down five million head. When there’s less cattle, there’s less need for hay.
Experts told farmers to expect relief for hay this year. Prices should be steady to higher in the first half of the year, if there is continued drought in key grazing areas.
by Courtney Llewellyn
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