Photo by Lea Kimley

Cattle price update

By Bernt Nelson, economist, American Farm Bureau

Cattle prices have come a long way in the first half of 2023. In fact, the weighted average market price for a steer this July is 27% higher than it was in July 2022. Drought and high input costs have driven many producers to market animals that would have been held back to grow their herds, and the resulting tighter cattle supplies are pushing retail beef prices to new highs.

Supply — July 1 Cattle Inventory

The semiannual cattle inventory report is a record of all cattle and calves, number of operations, and size group estimates categorized by class, state and the country as a whole. The report is released in January and July. The July inventory uses information from the responses of 10,000 surveyed cattle operations. The more robust January survey is based on the responses of 50,000 operations. 

In the July report, USDA estimated all cattle and calves in the United States on July 1, 2023, were 95.9 million head, down 3% compared to last year’s report. This is a bigger decrease than average analyst expectations of -2.3% or 96.3 million head. This is only 200,000 greater than the 2014 inventory of 95.7 million. U.S. beef cattle were estimated at 29.4 million head, marking a 52-year low for beef cattle supplies. The July 2023 5-market average is currently $184.21 per hundredweight (cwt), which is about 27% greater than 2022. This seems high but if we adjust for 28.88% inflation over the last decade, to be equivalent to the average price received in July 2014, the average cash price for fed steers would need to reach $203.51 per hundredweight.

The calf crop is estimated at 33.8 million head, also down 2% from July 2022. USDA estimates 24.8 million calves were born during the first half of the year, with 9 million expected to be born during the second half of the year (fall calves).

Cattle on feed

Also released on July 21, USDA’s monthly Cattle on Feed report estimates all cattle and calves on feed to be 11.2 million head on July 1, 2023, down 2% from July 2022. 11.2 million is slightly greater than the average analyst estimation, which was 2.4% fewer cattle on feed than last year or about 73,000 head below USDA estimates. 

Placements of cattle into feedlots were a surprise at 1.68 million head. This was 3% above last year and well above the average analyst guess of 1.6 million or 2% below July 2022. While this is a bearish number in the short run, it is important to remember that increased placements mean farmers are not holding those cattle back to be used for replacement purposes, which will tighten supplies later.

Global supply and export demand

USDA’s Foreign Agricultural Service’s most recent quarterly livestock poultry trade report, released on July 12, contains data for global trade, production, consumption and stocks and addresses global issues for livestock and meats. The report estimates global beef production for July 2023 is 59.6 million metric tons (mmt), up 1% from the April report. Drought conditions in other parts of the world, including Argentina and New Zealand, have caused herd liquidation, much like the U.S.. This will increase production in the short run in these countries, resulting in a slight increase in global production before declining cattle supplies cause production to slow. 

U.S. beef export sales are currently running about 14% below year-ago levels. The biggest drop in sales is to Japan, falling 27.3 mmt, followed by South Korea with a decline of 24.3 million metric tons. Mexico and Canada have helped pick up some of that drop in sales. Beef export sales to Mexico are up about 16% or 5.3 million metric tons more than this time last year, while export sales to Canada are up about 11% or 2.6 mmt ahead of 2022 levels. There is still hope for improvements in U.S. beef exports. Export sales for muscle cuts for the week ending July 20 were huge at 21,400 metric tons. Periods of strong export sales like this are a sign of good global demand for U.S. beef, even though total export sales are still behind year-ago levels.

Cattle inventory is continuing to decline. Beef cow slaughter numbers have begun to fall but heifers placed on feed are remaining steady while the overall number of cattle on feed is falling. Improving pasture conditions and better prices for calves are likely responsible for this change. Elevated placements of heifers on feed indicates that the contraction phase of the cattle cycle may continue through 2024. Demand has remained strong both globally and domestically. Tightening cattle supplies combined with continued demand are bullish signs for cattle and beef prices through the remainder of the year.

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