By Doug Schmitz
STILLWATER, Okla. – With 2023 drawing to a close, cattle experts are forecasting both challenges and opportunities for U.S. producers going into 2024.
“For many producers, continuing or recent drought is still very much of a challenge,” Derrell Peel, Oklahoma State University professor of agricultural economics and extension livestock marketing specialist, told Farm World.
“Obviously, sharply higher prices for all classes of cattle are an opportunity, and many producers are taking advantage by selling lots of animals,” he added. “For a variety of reasons, producers seem to be more focused on the short run, and maybe haven’t had the time or opportunity yet to think much about a longer-run strategy.”
Andrew P. Griffith, University of Tennessee professor of agricultural and resource economics, told Farm World the main challenge in the near term will be supporting cattle prices, given the strong cattle-on-feed numbers.
He said placements the first 10 month of 2023 in feedlots with 1,000 head or more are down 205,000 head, compared to the same 10 months in 2022. Placements in September and October of 2023 are 205,000 head more than the same two months in 2022.
“That is not a typo that the number of head is the same,” he said. “Thus, we have had several more thousand placed that probably would not have been placed those two months because of drought. The exact number is difficult to ascertain because some of them likely moved simply because prices were so strong, but the result is the same.
“However, as the number of cattle on feed begins to decline, and as producers begin to retain heifers for breeding, then the market should find support because there will not be many cattle available to enter the feedlot,” he added.
When asked what U.S. cattle producers should specifically be aware of (and look out for), he said, “Producers should keep their eyes trained on the futures market, and take advantage of the price volatility that is in that market. When prices are relatively low on futures contracts, then an opportunity to buy becomes available.
“For those selling, it is likely we will see another run in the feeder cattle contracts,” he added. “If a selling opportunity comes then there are opportunities with futures, option, and livestock risk protection insurance. Another thing to be aware of is when heifer retention begins, it will begin in earnest. Female prices will be high in the coming year.”
Peel said, “The supply situation is tighter and getting tighter, and is generally well understood. There are understandable concerns about global events, and macroeconomic conditions that could impact beef demand. They will bear continued monitoring.”
When asked what his forecast is for early 2024 – especially in light of the upcoming Jan. 1, 2024, USDA Cattle Inventory Report, Griffith said, “I think the market will start the year off a little slow because of the large quantity of cattle on feed.
“Once the report is released at the end of January (2024), we will likely see an increase in prices, but the large increase will not occur until we get some of these cattle moved through the system,” he added.
Peel said, “Futures and cash markets have undergone a severe correction in the past month. The correction was not surprising, but was made worse by general market jitters and geopolitical events. Stronger-than-expected feeder cattle selling this fall has bumped feedlot inventories, and created short-run bearishness.
“The correction appears to be about over, and markets will likely recover some before the end of the year,” he added. “Cattle inventories will be smaller on Jan. 1, 2024, and I expect that markets will resume a bullish posture in early 2024, if not sooner.”
Regarding how farmers can prepare their herds for the upcoming winter months, Griffith said, “From a production standpoint, producers need to make sure cows enter the winter in good body condition.
“Supplemental feed prices remain high, and having to supplement this winter will cut profits in a hurry,” he said. “From a market perspective, producers better remain on their toes as volatility will persist in this market, and violent price moves are just beginning.”
Peel said, “A lengthy period of tight cattle numbers and beef supply is expected for the next two to four years. Producers have an opportunity to think about how to position their operations to take advantage of bullish market conditions ahead.”