News

Kay’s Cuts: Drought might define US beef in 2023

Steve Kay, 23/01/2023

A monthly column written for Beef Central by US meat and livestock market commentator Steve Kay, publisher of US Cattle Buyers Weekly

 

 

 

JUST as the Australian beef industry is recovering from drought and is rebuilding its cow herd, the opposite has occurred in the United States.

The holiday season just ended brought the best possible gift to many US cow-calf producers – rain. But two years of extensive drought have had a big impact on US cattle numbers and this might linger in 2023 and delay any rebuilding of beef cow herds.

The silver lining to the drought’s impact is higher prices for all classes of cattle. Cash live cattle prices will see another large year-on-year increase in 2023. Prices are likely to average around US$156-157 per cwt live, versus an average of US$144.41 per cwt in 2022.

Feeder cattle prices will also see a healthy increase. Basis the Southern Plains, a 700-800 pound (320-365kg) steer will see an average price of US$180-182 per cwt, versus US$168.89 per cwt in 2022, according to the Livestock Marketing Information Centre. A 500-600 pound steer will see an average price of US$207-209 per cwt, versus an average of US$191.40 per cwt in 2022.

The higher prices, as they were in 2022, will be driven largely by four years of liquidation of the US cattle herd. The January 1 total cattle inventory is expected to be down to 89.5 million head. down 2.4 million head from a year earlier.

Commercial cattle slaughter this year is expected to total 32.591 million head, down 5.3pc from last year’s 34.398 million head, says LMIC.

This means US commercial beef production in 2023 will total 26.972 billion pounds, down 4.9pc from last year. The decline in the slaughter total will be slightly offset by a year-on-year increase in carcase weights, which will average 828 pounds (376kg) this year versus 825 pounds in 2022, says LMIC.

The projected 1.8 million head decline in the total slaughter means that both fed and non-fed beef processors will be forced to run their plants at a reduced capacity versus last year.

The availability of fed cattle will decline, but so too will the availability of slaughter cows because of the big year-on-year increase in cow slaughter in 2022.

Packers will likely respond by operating even less on Saturdays than they did in 2022.

Drought will be a key factor this year in terms of the availability of cattle to be placed on feed.

Continuing drought in key cow-calf states will continue to push cattle, notably heifers, into feedlots rather than being retained for herd rebuilding. Herd liquidation could linger into 2023 if the drought conditions in 17 states do not improve, says Derrell Peel, Oklahoma State University.

The new year is beginning with more of the same. The US has been in significant drought since late 2020 with drought conditions continuing into 2023. The final Drought Monitor of 2022 showed that 74.05pc of the US is abnormally dry or worse (with a D0-D4 classification), with 49.65pc of the country in D1-D4 levels of drought, he said.

As 2023 begins, 17 states have a DSCI greater than 150, mostly in the Central Plains and western US, says Peel.

Six states – California, Kansas, Nebraska, Nevada, Oklahoma and Utah – have a current DSCI over 300, with a maximum DSCI of 358 in Nebraska. These six states had 6.64 million beef cows at the beginning of 2022, accounting for 22pc of the total beef cow herd.

No doubt these states have already seen significant herd liquidation in 2022 but they clearly will face more herd liquidation if conditions do not improve, he says.

However, the last several weeks of 2022 and the first week in 2023 saw two substantial storms, notes Stephen Koontz of Colorado State University. This delayed holiday travel but also put substantial moisture in the Mountain West, some in the Southern Plains and more in the Northern Plains and upper Midwest. Cow-calf producers will be hoping for even more rain in the months ahead.

Meanwhile, the US Meat Export Federation is optimistic about US beef exports this year, although it concedes that volumes will be down sharply on 2022 shipments. USDA currently forecasts beef exports to total 3.09 billion pounds, down 13.3pc from 3.562 billion pounds in 2022. Other forecasts though are for far less of a decline.

New opportunities

However, new opportunities are on the horizon, says USMEF President and CEO Dan Halstrom.

This is an opportunity in 2023, knowing that the US will be down on beef production in total, to diversify its portfolio on the product side and provide more options to its customers around the world. But it does not change USMEF’s strategy, which is still to be aggressive, he says.

USMEF is working in markets like Japan, South Korea and Mexico and how the US provides alternatives to its customers in these markets, says Halstrom.

While consumers around the world may be used to buying certain products, USMEF is actively working to introduce other options that will continue to satisfy customers and increase demand for US meat, he says.

 

 

HAVE YOUR SAY

Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.

Comments

Get Beef Central's news headlines emailed to you -
FREE!