Cattle industry navigates high prices

Cow-calf returns remain at record highs. Despite this, producers are not showing signs of considering herd expansion. Many are taking advantage of the high cattle prices to sell cull cows, old cows, and heifer calves to improve liquidity, especially given high interest rates, age of producers, memory of the cattle downturn in 2015, labor challenges, grasshoppers and investor pressure on land prices. These challenges are delaying the anticipated near-term herd rebuilding, with predictions now set for 2026 to 2027. Furthermore, ongoing challenges with drought, currently affecting 24% of cattle areas, could lead to additional delays in the rebuilding timelines.

Beef production remains strong with higher-than-forecasted slaughter rates, as well as year-to-date steer dress weights increasing by 23 lbs and heifer weights increasing by 19 lbs from last year. Meanwhile, futures markets have dropped significantly but cash prices have only decreased slightly, suggesting a potential market rebound, but this bears watching closely. Strong cattle prices depend on robust consumer demand and July’s retail beef value set a record at $8.15 per pound. Prices will need to remain strong even though seasonal beef prices typically peak by Labor Day weekend.

Profitability

September 11, 2024

Cattle feeders: Slightly profitable - Bearish 12-month outlook
Cow-calf producers: Profitable - Neutral 12-month outlook

The cost of acquiring cattle will pose significant challenges for cattle feeder profitability, and scarcity may lead to intensified competition, further driving up prices. However, lower feed prices, particularly corn, are a mitigating factor to high placement costs.

Historically high cattle prices and lower feed costs support long-term cow-calf profitability, but headwinds persist with steep replacement cattle costs, ongoing drought, and high interest rates.