The past two to three years have seen the majority of the cow-calf sector in a defensive stance, grappling with adverse weather and rising production costs. The widespread drought has led to significant herd liquidation, contributing to an estimated 11% reduction in the beef cow herd since its peak in 2019, with about 6% of this decrease occurring in the last two years alone.
The USDA is set to release the January 1 cattle inventory numbers on January 31, which will shed light on the herd changes in 2023. The drought has driven hay prices to record highs in 2022, with only minor decreases in 2023. Additionally, the high costs of supplemental feeds, fertilisers, fuel, and other inputs have compounded the challenges.
As we enter 2024, there’s a slight easing in production costs, and drought conditions have improved in several regions. However, significant drought persists in parts of the country. Areas emerging from drought require time for forage and water resources to recover. This situation necessitates a cautious approach from many producers regarding animal stocking, indicating that restocking drought-reduced cow herds will be a gradual process.
Conversely, some producers are poised to adopt a more aggressive strategy in 2024. With cattle prices rising and a moderation in production costs, there’s an increased profit potential and incentives to boost calf production.
This could involve retaining heifers or acquiring breeding females to return to full production levels. Producers already at full capacity can focus on maximising calf production and sales, capitalising on market incentives to expand cattle and beef production.
The cattle markets began a transition in 2023. Despite ongoing herd liquidation, beef production started to decline from the record levels of 2022.
This downward trend is expected to continue into 2024 and beyond. While beef cow herd liquidation may slow or even halt in 2024, significant herd rebuilding is unlikely for at least a year, heavily dependent on future weather and forage conditions.
Heifer retention necessary for herd rebuilding will impact feeder supplies, feedlot production, cattle slaughter, and beef production. The pace of this process remains uncertain – a faster rebuild could sharply affect cattle and beef prices, while a slower expansion may prolong tighter supplies and higher prices.
Overall, the cattle market is signalling a shift towards more aggressive production. The response of individual cattle producers will vary, influenced by physical and financial constraints. Regardless, all producers should strategise on how to capitalise on current and upcoming market opportunities, whether they are in a position to go on the offensive now or in the near future.
