Cattle Outlook

Based on the most recent U.S. Drought Monitor data, the impact of drought continues to be a theme into the new year even as rains bring relief to beef cattle producers in parts of the West.

2023 Beef Production Raised

Based on the most recent U.S. Drought Monitor data, the impact of drought continues to be a theme into the new year even as rains bring relief to beef cattle producers in parts of the West. However, pasture and forage availability in the Central and Southern Plains likely remain tight as drought continues there. The impact can be seen in the hay stocks estimate released in the USDA, National Agricultural Statistics Service (NASS) report. Hay stocks on December 1, 2022, were 72 million tons, 9 percent below a year ago and the lowest for this period since 1954. This likely supports higher-than-expected cow slaughter in December, suggesting producers are still hampered by limited forage and higher associated costs.

For the week ending January 10, the U.S. Drought Monitor reported that over 69 percent of the United States is experiencing some level of drought, about 4 percent less than a year ago. According to the USDA World Agricultural Outlook Board, approximately 58 percent of the U.S. cattle herd is located in drought-stricken areas. This is an increase of 8 percentage points from a year ago. Clarification concerning the drought impact over last year will be revealed when USDA, NASS releases the semi-annual Cattle report on January 31. This report will provide estimates of cows and heifers available for breeding and an insight into the number of cattle that producers may be planning to place during 2023.

The latest USDA, NASS Cattle on Feed report showed a December 1 feedlot inventory of 11.673 million head, about 3 percent below 11.985 million head in the same month last year. Feedlot net placements1 in November were down 2 percent year over year at 1.868 million head, higher than industry analysts’ expectations. Marketings in November were 1.891 million head, up more than 1 percent year over year. On December 1, the number of cattle on feed over 150 days dipped 5 percent below year-ago levels, the lowest since 2018 for the month. Tighter market-ready supplies from a year ago in Iowa, Kansas, and Nebraska more than offset larger volumes of cattle on feed over 150 days in Texas.

Based on actual and estimated data for December, the pace of fed and nonfed cattle slaughter according to the number of weekdays in the month was down about 5 percent and 1 percent, respectively, from last year. However, the share of cows in the slaughter mix was up more than 2 percentage points, likely pushing down average carcass weights. Winter weather conditions likely played a factor in fewer fed cattle slaughtered at lighter weights in the last 2 weeks of the month.

From last month’s forecast, fourth-quarter 2022 production is lowered 115 million pounds based on December weekly slaughter reports and daily estimates. Lower reported steer and heifer and bull slaughter, as well as lower carcass weight data, more than offset higher cow slaughter. Total 2022 beef production is projected at 28.3 billion pounds, an increase of about 1 percent from 2021.

As suggested by the December Cattle on Feed data, tighter market-ready supplies of fed cattle are expected to slow down anticipated marketings in first-quarter 2023. However, larger-thanexpected placements in November raised the outlook for marketings in the second and third quarters. The anticipated cow slaughter outlook for 2023 was raised on early January slaughter data and persistent poor forage conditions. Lighter carcass weights in fourth-quarter 2022 are carried over into early 2023. As a result, the increase in expected marketings and cow slaughter in 2023 more than offset lighter anticipated weights, raising the outlook for 2023 beef production by 170 million pounds to 26.4 billion pounds.

Cattle Prices Raised on Tightening Supplies

In December, prices for feeder steers 750–800 pounds at the Oklahoma City National Stockyards recorded a weighted average of $179.88 per hundredweight (cwt), which was $14 above December 2021. This raised the quarterly average to $177.06 per cwt and the average annual price for 2022 to $165.94 per cwt, up $19, or 13 percent, from last year.The first feeder steer prices of 2023 were reported on January 9 and 16 at $178.19 and $180.93 per cwt, almost $22 and $19 above the same weeks last year. Based on higher-than-expected November feedlot placements rising and tighter anticipated supplies of cattle available for placement in early 2023, the forecasts for feeder steer prices in the first two quarters of 2023 are raised to $182 and $192, an increase of $5 and $2, respectively. This raises the 2023 annual feeder steer price forecast to $203.00 per cwt, a year-over-year increase of 22 percent.

Prices for fed steers in December averaged $156.53 per cwt, more than $17 above December 2021, which raised the fourth-quarter average price to $152.99 per cwt. Fed cattle prices have continued steady into the new year. As reported for the weeks ending January 8 and 15, the negotiated prices for fed steers in the 5-area marketing region were $157.74 and $156.78 per cwt, respectively. Based on tighter supplies and expected strength in boxed-beef prices during the year, fed steer prices are raised in each of the quarters for an annual projection of $158.50 per cwt in 2023.