The optimism surrounding cattle markets initially of this 12 months is the best since 2014-2015. Cattle provides tightened in 2022 whereas beef demand remained comparatively regular. We’re coming into 2023 with the expectation of a smaller calf crop that’s extra related in dimension to 2014 than to current years.
There can be challenges forward, particularly with navigating greater enter prices and questions on beef demand in 2023. However the total projection is for stronger cattle market costs.
2022 was a singular 12 months for cattle manufacturing and markets. James reviewed final 12 months within the final e-newsletter of 2022 (accessible right here). The speed of beef cows and heifers processed was notably noteworthy. Round 12 % extra beef cows and about 5 % extra heifers have been processed in 2022 than in 2021.
The ensuing influence for 2023 is these cows and heifers will not be producing calves this 12 months. Though it is just January, the stage is already set for tighter cattle and beef manufacturing in 2023. Such is the cyclical nature of the cattle trade – manufacturing selections have lengthy impacts.
Cattle markets improved all through 2022. Fed cattle costs are up practically $20 per CWT above year-ago ranges. Feeder cattle costs are additionally up. If we examine to 2 years in the past, the variations are stark. Fed cattle costs have improved by $50 per cwt since December 2020 when markets have been nonetheless wrestling with the worst of the pandemic impacts – roughly a 50 % improve.
Greater grain costs proceed to be a problem for producers. U.S. Drought circumstances worsened close to the tip of 2022 and the way lengthy dry circumstances persist into 2023 can be a key driver for cattle markets. Many areas have acquired rain in current weeks which helped enhance the drought monitor some. Excessive cattle costs may ship alerts to develop, however producers will nonetheless want sufficient pasture or economical feedstuffs to take action.
The December 1 Cattle on Feed estimates have been launched simply earlier than Christmas. The report confirmed cattle on feed at 11.7 million head which was practically 3 % decrease than December 1, 2021. This was the third consecutive month with a decrease than year-ago whole. Placements throughout November have been down 2 % 12 months over 12 months whereas marketings have been up 1 %.
Feedlot provides usually peak seasonally through the winter, however December was a decline from November in 2022 (see chart above). Will probably be attention-grabbing to see whether or not the one of many coming months tops the November whole or if we’ve already reached the seasonal peak.
Trying forward, CME futures costs for 2023 contracts are buying and selling at ranges not seen since 2015. The entire fall 2023 feeder cattle contracts are above $200 per CWT and the spring contracts are close to $190 (see chart above). The 2023 reside cattle contracts are close to $160. The beginning of a brand new 12 months is an effective time to contemplate value threat administration alternatives (click on right here to learn Kenny’s February 2022 e-newsletter about threat administration concerns).
The present optimism in markets will very seemingly permit for stronger pricing alternatives than in previous years. Whether or not you think about using futures, choices, or USDA’s Livestock Threat Safety (LRP), there are instruments accessible for producers of each dimension to dump some value threat if you want to take action.
Supply:Mississippi State College
