Heavier carcass weights offset decline in production

Analysts forecasted a 4-5% decline in 2024’s beef production, but by mid-September, production was down only 1.1% from the previous year. This discrepancy is due to heavier carcass weights. Steer carcass weights averaged 930 lbs in August 2024, up 29 lbs from a year ago. Heifer carcass weights are up 20 lbs from the previous year. The increase in carcass weights is largely driven by a reduction in cattle numbers, incentivizing longer feeding periods to maintain feedlot inventories. Decreasing feed prices also encourage longer feeding periods as the value of gain exceeds the cost. Corn prices were under $4 per bushel in August, before rising by $0.29 per bushel during September. Hay prices have fluctuated but remained below 2023 levels for feeder quality hay. Northwest feedlots had access to ample, low-cost potato silage due to an oversupply of potatoes in 2023.

Producers are optimistic due to strong cattle market performance. Western producers have seen phenomenal fall sale prices, with some calves selling for over $3 per cwt. Despite increasing drought conditions in parts of the West, the availability of inexpensive and abundant hay has boosted confidence. Even with the expected seasonal price softening during the fall, producers remain positive.

Starting Nov. 5, all ear tags for cattle, including all dairy and sexually intact beef breeds over 18 months, must be electronically readable for interstate shipment. Cattle going directly to slaughter and those moving across state lines to graze pasture are exempt, and ear tags applied before this date are grandfathered in. The USDA aims to increase traceability for disease outbreaks, enabling quicker responses and supporting international buyer trust. However, some ranchers are concerned about data security and finding electronic tags could be cost-prohibitive for smaller operations in the long term (tags averaging $3 per head). Opponents also argue that for the system to be fully prepared for a foreign animal disease outbreak, approximately 70% of cattle would need to be traceable, whereas this new rule would only affect about 11-12% of cattle.

Profitability

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.