Cattle cycle extends - tight supply boosts prices

USAgNet - 02/05/2024

The 2024 CattleFax Outlook Seminar painted a picture of a complex cattle market in the coming year. While record-high prices for fed cattle and calves were achieved in 2023 due to a limited cowherd and strong demand, expansion might be hindered by several factors.

Headwinds to Growth:

• Lingering drought: Despite some improvement, drought continues to impact over a third of the cowherd, limiting expansion potential.

• High input costs: From feed and labor to equipment, rising costs pose a challenge for producers considering expansion.

• Market uncertainty: Concerns about inflation, interest rates, and overall economic stability create a cautious environment for investment.

• Limited labor availability: Finding skilled workers remains a hurdle for many cattle operations.

Slower, Prolonged Cycle:

CattleFax predicts a slower and more extended cattle cycle compared to previous years. Heifer retention is still low nationwide, leading to a projected decline in supply by 2026. This, combined with reduced commercial fed slaughter and lower feeder cattle availability, could push prices even higher.

Weather Watch:

The shift from El Niño to La Niña brings concerns for the Central and Southern Plains, where increased heat and drought are predicted. The northern tier and Ohio-Tennessee Valley, on the other hand, might see more favorable moisture conditions.

Price Forecast:

Despite potential consumer concerns about affordability due to inflation and debt, the overall demand for U.S. beef is expected to remain strong. CattleFax predicts an average fed steer price of $184/cwt. in 2024, marking another increase.

Global Context:

Rising global protein demand is expected to support U.S. beef export prices, even though a slight decline is forecast for 2024.

Overall Outlook:

CattleFax CEO Randy Blach remains optimistic, predicting a positive albeit slower and extended cycle for the industry. Cow-calf producers are likely to benefit from strong margins due to the tight supply of feeder cattle, with peak prices anticipated in 2025-2026.

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