time and patience Slow Go Building back from massive beef cow liquidation will

by Wes Ishmael

Even when mother nature allows, expanding the U.S. beef cow herd will likely be a tedious process.

For one thing, drought forced more heifers into feedlots than during the last widespread, lingering drought about a decade ago. So, folks are basically starting from scratch.

“One key difference is that in 1989 the largest drop occurred in animals under 500 pounds — down 1.5 million head of the drop in total cattle inventory,” LMIC analysts explain in the early-February Livestock Monitor. “This year, over 1 million cows were lost, predominantly in the beef breeding herd.” continued on page 73 continued from page 70

When this year began, the nation’s beef cow inventory of 28.92 million head was 1.06 million fewer (-3.6%) year over year. It was the smallest since 1962, according to the Agricultural Marketing Service (AMS).

Beef replacement heifers of 5.16 million head were 317,800 head fewer, down 5.8%.

“Low retention and a much smaller ‘other’ heifer number represent the significant undercutting that has happened to the beef cattle herd,” LMIC analysts explain.

Plus, high input costs mean margins are thinner than they were during the run of historically high cattle values fondly recalled from 2014-15.

Among challenges to herd expansion from the production side, Lance Zimmerman, senior analyst of animal protein at Rabobank’s RaboResearch cites increasing competition for protein consumers and feed resources, record-high feed and forage prices and rising interest rates.

On the other side of the equation, packers and processors face cost pressure as cattle supplies decline.

“Processors will face a situation that has been relatively foreign to them over the last seven years,” Zimmerman explains, in a new report, examining ultimate beef cow herd expansion. “All classes of cattle supplies will shrink, and the financial viability of packing plants, valueadded processors and distributors will be stressed as each participant fights to maintain capacity utilization. Declining cattle and beef production should not lead to additional facility closures. However, battles for market share will intensify and the recent additions in the sector will face additional margin compression, while construction and fundraising for new facilities will face more scrutiny and skepticism.

Zimmerman notes the annual cow culling rate last year was a record-high 13.4%.

“Recent herd contraction and eventual transition to heifer retention mean it is plausible that U.S. cattle slaughter will decline between 1.0 and 1.5 million head per year for the next four to five years before increasing again,” Zimmerman says.

Never mind that the current drought has yet to end.

“Last year, 25% of the cow herd, on average, was in exceptional or extreme drought conditions. 50% were in drought conditions and 65% were in dry or drought conditions,” explained Kevin Good, CattleFax vice president of industry relations, during the recent CattleFax Outlook Seminar in New Orleans.

The first week of February, 42.6% of the nation was experiencing drought, compared to 55.2% a year earlier. Throw in abnormally dry conditions and 61.6% of the nation was affected, versus 72.2% a year earlier.

At the time, approximately 55% of the U.S. cattle inventory was in drought areas.

The Hay Challenge

Hay piles have mostly been whittled down to memories in many parts of the country.

Using a shorter rope, low hay stocks could prompt more beef cow liquidation this winter, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in late-January market comments.

He points out Dec. 1 hay stocks for the nation were 16.4% less than the previous 10-year average at 71.9 million tons. It was the least on record going back to 1973.

“Each of the top 10 states for hay stocks was down compared to the 10-year average and collectively were down 20.8% from the 2012-

2021 average Dec. 1 stocks level,” Peel says. “The largest hay stocks on Dec. 1 were in Texas — 25.8% below the 10-year average for the state. Other top 10 states were down from the 10-year average ranging from Tennessee (down 10.9%) to Oklahoma (down 32.7%).” continued on page 74 these bulls are the using kind. Study their many positive attributes. We are confident you will be as impressed with their credentials as we are.

During the same seminar, Mike Murphy, CattleFax vice president of research and risk management services, explained U.S. hay production last year was the least since 1959. However, he also pointed out there are 5 million fewer beef cows today than in 2000, so depleted stocks will be able to recover sooner.

“Hay prices will likely continue to be high in the first part of 2023, but we expect weather patterns to improve pasture conditions as early as this spring which should help stabilize and soften hay prices throughout 2023,” Murphy said.

Weather models do paint a more positive outlook for hard-hit parts of cow country later this year.

CELL keystone 2221K

50% Lim-Flex • Homo Polled • Homo Black

TASF Crown Royal 960C x Pleasant Valley Elsa 1439

BW: 2.6 WW: 82 YW: 122 MA: 20

RE: 0.71 MB: 0.25 $MI: 65

Owned with Linhart Limousin. Watch for progeny out of the top-selling bull in 2022.

CELL Guard House 9300G

46% Lim-Flex • Homo Polled • Homo Black

PBRS Bunk House 48B x MAGS Dominant Deva

BW: 1.9 WW: 76 YW: 121 MA: 14 RE: 0.29 MB: 0.20 $MI: 60

Owned with the Guard House Syndicate. Semen available through Grassroots Genetics [515.965.1458].

TMCK Fleetwood 577F

75% Lim-Flex • Homo Polled • Homo Black

TMCK American Made 353D x TMCK Bordeaux 095B

BW: 0.8 WW: 76 YW: 111 MA: 12 RE: 0.84 MB: 0.28 $MI: 65 Contact owners for semen.

Matt Makens, meteorologist for CattleFax said the latest forecast for La Niña had only a 14% probability this spring and less of a chance by the summer. He explained a neutral phase will take control of the pattern as La Niña weakens and may last several months before giving El Niño a chance to grow this summer and into the fall.

Prices Trek Higher

In the meantime, prices and profitability will favor cattle producers this year, according to CattleFax analysts.

Good forecast the average 2023 fed steer price at $158/cwt., up $13 from 2022, with a range of $150 to $172/cwt. CattleFax projects feeder steers (800 lbs.) to average $195/cwt. with a range of $175 to $215/cwt. Steer calves (550 lbs.) are forecast to average $225/cwt., with a range of $200 to $245/cwt.

“Drought affected nearly half of the beef cow herd over the last year, exacerbating the liquidation in 2022,” Good says. “Drought improvement and higher cattle prices should drastically slow beef cow culling through 2023.”

Good forecast utility cows at an average of $100/cwt. with a range of $75 to $115/cwt. CattleFax projects bred cow prices at an average of $2,100 per head for load lots of quality, running age cows; a range of $1,900 to $2,300.

Likewise, in the January Livestock, Dairy and Poultry Outlook, USDA’s Economic Research Service (ERS) increased projected feeder steer prices (750-800 lbs., Oklahoma City) for the first two quarters of this year, based on more November feedlot placements than expected, and tighter anticipated supplies available for placement early in 2023.

ERS increased the projected first-quarter price by $5 to $182/cwt. and the second-quarter price by $2 to $192. Projected prices are $214 in the third quarter and $224 in the fourth quarter for an annual average of $203.

On the other side of the scale, ERS increased the expected annual five-area direct fed steer price for this year to $159/cwt., in the February World Agricultural Supply and Demand Estimates (WASDE). Prices were forecast to be $158 in the first quarter, $159 in the second quarter, $157 in the third quarter and $162 in the fourth quarter.

Prices were raised on expected strength in first-half demand for fed cattle in the face of tightening feedlot numbers.

ERS increased projected beef production for this year by 50 million pounds to 26.49 billion pounds. That would be 1.8 billion pounds less (-6.3%) than last year’s projected total.

“Slaughter is raised for the first quarter but is partly offset by lower carcass weights as cow slaughter is larger than previously forecast,” ERS analysts explain. “For the second quarter, steer and heifer slaughter is lowered as fourth-quarter 2022 placements were lower than expected, implying fewer animals available for marketing in the second quarter. Lower fed cattle slaughter, coupled with lower average carcass weights, more than offsets higher expected cow slaughter.”

As for corn prices, the WASDE pegs the season-average received by producers at $6.70/bu.

However, Murphy sees price and basis relief on the horizon. Although CattleFax projects planted corn acres this year similar to

2022, Murphy says trend-line yields and increased harvested area suggest new-crop corn prices in the range of $5.00-$5.50.

Strong Beef Demand Continues

Last year, per capita beef supplies were the largest in 12 years. Yet, Good points out retail beef prices were record high on average. “Beef demand remains historically strong,” he says.

More than two-thirds of consumers reportedly eat beef on a weekly basis, or more, according to the recent Today’s Beef Consumer report from the National Cattlemen’s Beef Association (NCBA), a contractor to the Beef Checkoff.

“During the pandemic consumers were forced to cook at home and many have continued to do so as it has become a popular way to make a dollar stretch and combat inflation,” according to the report. It found 76% of meals are now cooked at home and 94% of consumers who are cooking more at home say they will continue to do so.

“In 2022 fresh ground beef accounted for 50% of volume of beef sales, likely due to the lower price point as well as a renewed consumer interest in comfort foods and nostalgic recipes, like meatloaf,” according to the report.

Report analysts explain inflation is top of mind with 78% of consumers noticing an increase in the price of food whether at retail or foodservice. However, beef has experienced far lower levels of inflation when compared to other proteins in the “food at home” category.

As for food service, beef sales in both dollars and volume rebounded to surpass the pre-pandemic level of 2019.

International demand for U.S. beef remains stellar, too. U.S. beef exports set annual records for both volume and value in 2022, according to year-end data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

continued on page 76

CELL History Buff 0245H

Purebred • Homo Polled • Homo Black

CELL Envision 7023E x CELL Miss Responder 6078D

CE: 5 BW: 3.5 WW: 94 YW: 153 MK: 19

CM: 2 SC: 1.80 DC: 14 YG: -0.40 CW: 58

RE: 1.40 MB: 0.19 $MI: 69

Act. BW: 88 • Adj. WW: 713 • Adj. YW: 1,306

Adj. SC: 38.9 Adj. RE: 16.78 • Adj. IMF: 2.795

Owned with Linhart Limousin. Semen available through Grassroots Genetics (515.965.1458).

Wulfs Gallagher 7056G

75% Lim-Flex • Homo Polled • Red

Wulfs Xcellsior X252X x Wulfs Edwinna 7056E

CE: 18 BW: -4.2 WW: 60 YW: 89 MK: 28

CM: 9 SC: 1.00 DC: 16 YG: -0.25 CW: 32

RE: 0.88 MB: 0.28 $MI: 60

Act. BW: 74 • Adj. WW: 710 • Adj. YW: 1,218

Adj. SC: 34.9 Adj. RE: 13.70 • Adj. IMF: 3.040

Owned with Wulf Cattle.

Semen available through Grassroots Genetics (515.965.1458).

Our herd sires continue to prove themselves within the industry. If you are looking for easy birth and great growth, then we have what you are looking for. Don’t hesitate to call - all inquiries are welcomed!

COLE Jackpot 38J

81% Limousin • Homo Polled • Homo Black

CELL Envision 7023E x CELL Miss Xrated 354A

CE: 10 BW: 2.7 WW: 88 YW: 138 MK: 24

CM: 6 SC: 1.30 DC: 16 YG: -0.35 CW: 48

RE: 1.23 MB: 0.28 $MI: 70

Act. BW: 96 • Adj. WW: 782 • Adj. YW: 1,377

Adj. SC: 37.6 Adj. RE: 18.16 • Adj. IMF: 3.180

Owned with Coleman Limousin Ranch. Semen available through Grassroots Genetics (515.965.1458).

CELL TMCK Kickin Up Dust 2261K

64% Lim-Flex • Homo Polled • Black

COLE Genesis 86G x TMCK Grizzly Rose 700G

CE: 12 BW: 2.2 WW: 89 YW: 136 MK: 28

CM: 8 SC: 1.20 DC: 19 YG: -0.15 CW: 52

RE: 0.75 MB: 0.60 $MI: 80

Act. BW: 88 • Adj. WW: 779 • Adj. YW: 1,409

Adj. SC: 37.7 Adj. RE: 16.30 • Adj. IMF: 5.075

Owned with Linhart Limousin. Contact owners for semen availability.

CURT & LEANNE WIECZOREK

605-227-4601 • clwzrk@santel.net

39768 267th St. • Mount Vernon, SD 57363

WIECZOREKLIMOUSIN.COM continued from page 75

“2022 was a ground-breaking year for U.S. beef’s international presence, with global demand stronger than I’ve seen in all my years in the industry,” says Dan Halstrom, USMEF president and CEO. “Late in the year, exports certainly felt the impact of persistent headwinds in our large Asian markets, including depressed trading partner currencies and COVID-related challenges in China, but the long list of countries in which records were set showcases the industry’s focus on diversifying export markets. While the year ahead will be challenging due to supply constraints, the exchange rate situation has improved and we still see room for growth in the foodservice sector as more regions continue their gradual rebound from COVID.”

U.S. beef exports reached 1.47 million metric tons in 2022, up 2% from the previous high in 2021. Export value climbed to a record $11.68 billion, up 10% from 2021 and nearly 40% above the previous five-year average. The U.S. exported a record share of its record-large beef production in 2022, and at higher prices.

Beef export value equated to a record $447.58 per head of fed slaughter in 2022, up 10% from the previous high achieved in 2021.

“With drought forced placement and culling, beef production was record large in 2022 at 28.3 billion pounds. Expect production to drop over the next several years – declining 4% to 5% in 2023 to 27 billion pounds,” Good said. “The decline in production in 2023 will lead to a 2.2-pound decline in net beef supply to 57 pounds per person.”

Bottom Line

Despite the headwinds, Zimmerman believes U.S. cattle numbers can recover during the next cattle cycle and challenge the recent beef cow inventory highs near 32 million head.

“But the supply chain should proceed with caution as it looks to the future,” Zimmerman says. “It is going to take time and cooperation to turn recent trends.”

Zimmerman says a culling rate of near 10% is required to stabilize herd size. He expects the culling rate this year to be close to 12%.

“That means the best-case scenario is some level of stabilization arriving in 2024, and the timeline from the previous herd expansion suggests it will take until 2025 or later for meaningful rebuilding,” according to Zimmerman .

ABOUT THE AUTHOR: Wes Ishmael has been involved with livestock publications since 1983. Wes grew up in Colorado and has always been in and around the livestock business. He now lives in Benbrook, Texas.

The Heartland Limousin Association welcomes all Limousin enthusiasts. HLA is passionate about the growth of the breed and connecting seedstock producers with commercial cattlemen.