Live cattle futures haven’t been very encouraging the past month, and even the deferred contracts don’t offer much enthusiasm going forward. Boxed beef markets have been softer the past week, falling to $274. Packers will be trying to buy cattle cheaper going forward, at least until the spring beef rally. April futures show a $160 market as the spring high.
Feeder cattle, on the other hand, are encouraging. August feeders are currently trading in the $205 range. True yearling feeder steers are going to be worth a lot of money this late summer and fall. It’s kind of hard to figure $200 feeders and $160 fed cattle working very well with corn trading close to $8 a bushel. Something has got to give. Can we expect consumers to pony up for beef and retailers to sacrifice margins to keep moving it?
Cash markets must show us the way to higher cattle prices; feeder cattle markets have done their job, while fed cattle are lagging. Packers processed 661,000 head a week earlier, which was the highest slaughter since mid-December. Packers are making around $100 per head—is that going to be enough profit to keep slaughter lines moving, or will packers slow production down again to maintain margins? I expect the latter because they don’t appear to be eager to pay more than $160 for cattle, the current high point.
The 2023 Cattle Inventory report is due out Jan. 31, and the Livestock Marketing Information Center is calling for total inventory to be down 3.2% from a year ago, 88.8 million head. In 2014, cattle inventory was 88.2 million head.
Dairy cows should be down 0.5%, while beef cows will be down around 4.4%. Beef replacement heifers are also expected to be down 4.4%. Current replacement heifer markets have been relatively strong this past fall, showing producer optimism. The total calf crop, both dairy and beef, is expected to be down 4.5% from last year, 32.75 million calves.
Does anyone really believe that spring fed cattle markets are going to languish around the $160 mark? I certainly can’t see it. December placements are expected to be down 10% or so, and November was down 2.3%. Cattle on feed for Jan. 1 is expected to be down 3.3%. Cattle feeders have some tough decisions ahead of them, with no market indicators showing the way.
It appears that the West may have enough moisture for a change; the current snowpack in western mountain ranges is as high as 250% of normal in some areas. There is no denying that the West experienced one of the most notable droughts in a very long time. Much of the southern Plains remains dry and wheat grass cattle production will be subpar. I would guess at this point that West Coast grass will be excellent, and cattle folks will not be able to get enough calves out on native grass, at least like they did 30 years ago. Some yearling operators said they can see a 300-pound season in California.
In other news, NCBA filed a lawsuit against the Biden administration’s Environmental Protection Agency (EPA) over the new—if you can call it that—Waters of the United States (WOTUS) rule. NCBA Chief Counsel of Government Affairs Mary-Thomas Hart said in a released statement, “The Biden administration’s WOTUS definition is an attack on farmers and ranchers and NCBA will be fighting back in court. The rule removes longstanding, bipartisan exclusions for small and isolated water features on farms and ranches and adds to the regulatory burden cattle producers are facing under this administration. We look forward to challenging this rule in court and ensuring that cattle producers are treated fairly under the law.”
We had to see this coming. WOTUS is a regulation that won’t satisfy anyone and has been litigated for at least 20 years. The only peace agriculture had on this regulation was during the Trump administration. It’s ironic that the Biden administration didn’t realize the unworkable nature of WOTUS and made no attempt to listen to agriculture after EPA held several forums just for agriculture. I suppose that much of California is considered regulated water since there is water just about everywhere. Can you imagine trying to get a permit in California to dig a ditch to move floodwaters off your land and move it to a pond or dirt tank? The entire state could be considered protected waters. The Biden administration moved WOTUS back several decades.
But what do you expect from an administration that makes every decision with the criterion of climate change. It’s clear that we need to do a better job managing water, but we don’t need to micromanage it. Farmers and ranchers generally do the right thing when it comes to managing their own or leased property. Agriculture is perhaps the most conservation-minded demographic in the world. Let them do their thing and produce from the earth. — PETE CROW
