Cattle Outlook for 2023

DR. ANDREW P. GRIFFITH

KNOXVILLE, TENNESSEE

   As one year comes to an end and a new year comes into view, many people like to reflect on their successes and challenges and then look forward to what they want to achieve in the new year. When it comes to the cattle business, many of the successes and challenges faced in the previous year were influenced by uncontrollable factors such as the weather. The cattle producer does have some influence in that he or she had a plan and then had to make decisions on how to alter that plan given the uncontrollable circumstances. However, the new year means a new plan, because 2023 will not be like 2022. With that thought in mind, 2023 cattle markets will not be the same as 2022, because there were several things that happened in 2022 that will influence cattle markets for years to come.

   The big story for 2022 for many regions of the United States was drought. This widespread drought led to reduced forage and hay production, which also led to increased beef cow and heifer slaughter. This situation was further compounded by higher input costs, which was led by feed, fertilizer, and fuel prices increasing. The other major factor influencing producers and consumers alike is the general economy, which is being transformed by inflation and increasing interest rates. Thus, the hope is to tie all of these factors into cattle price expectations for 2023.

   The logical place to start seems to be with increased beef cow and heifer slaughter. As of this writing, 2022 heifer slaughter year-to-date was 4.7 percent (421,400 head) higher than 2021 while beef cow slaughter was 12.0 percent (382,600 head) greater than 2021. Slaughter rates the last quarter of 2022 have slowed relative to the last quarter of 2021, which will likely result in beef female slaughter in 2022 being right at 800,000 head more than 2021.

   These values do not mean much until it is placed in relative terms. Thus, heifer slaughter in 2021 was 4.6 percent (428,200 head) greater than 2020 while beef cow slaughter in 2021 was 9.5 percent (307,200 head) greater than the previous year. The increased slaughter rate in 2021 resulted in the number of beef cows declining 718,500 head (-2.3%) from January 1, 2021 to January 1, 2022 based on the annual cattle inventory report. Based on the same reports, there was a decline of 191,600 head (-3.3%) of heifers held for beef cow replacement from 2021 to 2022.

   All of this information is pointing toward a smaller calf crop, but the question is just how small. Given the year-over-year increase in slaughter rates, beef cow inventory on January 1, 2023 is likely to come in around 29.1 million head, which is a one million head decline compared to the previous year and the lowest beef cattle inventory since 2014. Similarly, we are likely to see the number of heifers for beef cow replacement decline close to 400,000 head, which would mean only 5.2 million were retained this year. This could easily reduce the calf crop in 2023 by close to one million head, which is close to two weeks of finished cattle slaughter.

   Despite the bullishness supplied to cattle markets due to a smaller number of animals, cattle producers will continue to face high input prices. This will likely reduce output as many producers are expected to purchase less fertilizer, feed, and fuel, which will reduce total pounds sold. This means profits will be whittled one way or the other. Increasing interest rates are another way of increasing production cost as capital is becoming more expensive.

   Lastly, inflation has made all goods more expensive for the producer and the consumer. This may hamper consumer disposable income moving through 2023, which may slow beef movement to some degree. How consumers spend their disposable income will be a big question mark throughout the year.

   Overall, cattle prices are expected to increase in 2023 relative to 2022. However, producers should not be overly optimistic as prices are unlikely to reach lofty goals as projected by some, and profitability will be hampered by high production costs. Across the cattle complex, prices are likely to increase between 7 and 12 percent.  ∆