Profit margins will determine whether cattle producers will continue to liquidate their herds in 2023, University of Nebraska Extension ag economist Elliott Dennis says. In his “In the Cattle Markets” column for the Livestock Marketing Information Center, he says the latest numbers show the current national herd reduction is ongoing.
“The USDA Cattle Inventory report showed a 4% reduction in beef cows, a 6% decrease in heifers held back for retention, and a 5% reduction in heifers expected to calve this year,” Dennis says. “Feeder cattle supplies will be reduced nationally in 2023.”
The markets and costs will drive how long these trends continue, he says.
“Continued liquidation in 2023 will depend on the profit margins producers expect to receive,” Dennis says. “Higher prices for feeder cattle are expected but higher feed costs, especially hay, and other inputs are limiting the profit potential.”
Changing weather patterns could also impact decisions, he says.
Bred cows and bred heifers could play a role in cattle supply decisions this year and next, Dennis says.
“There will be producers who have feed resources and believe profits are to be had in 2023 and 2024,” he says. “The quickest way for these producers to increase the feeder cattle supply is through the addition of bred cows or bred heifers. Bred heifers receive a premium over bred cows.”
Dennis says the cost of bred cows can vary based on factors such as how close they are to calving, and then market conditions play a big role.
“Current market conditions will also play a role in the price of bred cows,” he says. “The feeder cattle and corn markets are the two largest drivers of bred cow prices. Higher feeder cattle prices create incentives for more calves to be brought to market and bred cows are the quickest way to do so.”
These higher costs create downward pressure.
“Higher corn prices increase the cost of gain in feedlots,” Dennis says. “This puts downward pressure on feeder cattle prices although the impact is delayed as it takes at least 6-8 months before the potential calf will reach the feedlot. Combining these impacts and current price forecasts can show the premiums and discounts producers can expect to receive for a bred cow.”
