Will Cattle Prices Smash New Records This Year, Topping 2014?

After four years of liquidation, the U.S. cattle herd continues to contract. With drought still a driving force behind lower cattle numbers, market experts think cattle price could top previous price records set back in 2014.

According to the semi-annual cattle inventory report, total beef cow inventory numbers were down 4% year-over-year, coming in at 28.9 million head. According to Drovers, the total beef cows reached the lowest point in inventory in over 50 years.

According to Don Close, chief research and analytics officer for Terrain, the inventory report revealed even tighter supplies than what the market expected.

“I think we've been a little bit misled because of the cattle on feed numbers still at 100%,” says Close. “But if you look at the numbers behind that, and what's available for replacement cattle, as we go through 2023, I think that supply is going to contract at a substantially faster rate than what we've been expecting.”

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Oklahoma State University livestock marketing specialist Derrell Peel expects cattle liquidation to continue. And the main reason is due to the weather.

“We're still in a drought, and so it really is in the hands of Mother Nature,” says Peel. “We're smaller than we need to be now from the standpoint of the market. So, the industry would be happy to stop contracting at this point. But I think it just hinges on the drought.”

Peel says while the winter weather is providing some moisture, it’s also putting pressure on cattle producers who are trying to maintain their herds.

“We've got folks that aren’t sure they can hang onto their cows through the winter with tight hay supplies,” Peel says. “And then depending on what spring looks like from a drought standpoint, the liquidation may continue or it may not.”

The Gas Tank is Empty 

Close expected the inventory report this week to show some heifer retention taking places in areas like the Dakotas, Montana and the Southeast. The report revealed the opposite, which means the stronger cattle prices could be a trend longer-term. 

“The report to me, it just shows the gas tank empty, and all classes of cattle,” says Close. “And so I'd say the biggest surprise for me going into that record is there's been absolutely zero heifer retention to this time. And I agree with Derrell, we don't have the green light to move forward yet.

It'll Take Longer to Rebuild This Time 

With heifer retention low, it paints the picture of a smaller calf crop. Peel says that’s another reason he thinks the rebuilding of the U.S. cattle herd will take longer than a decade ago.

“It's going to take longer to rebuild this time, because I do think the gas tank is empty,” says Close. “It's going to take longer to develop heifers for breeding. And when you look at the biologics of the way the cattle industry works, it's going to take longer than it did the last time, certainly in terms of our ability to rebuild the herd and get beef production back up once it comes down here, going forward.”

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The U.S. saw extreme drought impact the cattle herd, leading to tighter supplies in the foreseeable future, with rebuilding likely to have a longer tail than the last time and the price forecasts remaining bullish. But now it’s a question of if prices can top the highs set back in 2014, and Close thinks cattle prices will hit new highs.

“I don't think there's any question about it,” says Close. “If we look at the low 170 level on fed cattle that we saw at the peak of the 2014/2015 market, I think before this one's done, we will go through those old historical highs with gusto. And to support that, I still think we're working with a very solid demand base under the market, which is only going to exacerbate this whole situation.”

Higher Highs for Prices? 

Peel thinks cattle prices will continue to trend higher, but when could prices peak? Peel says that depends on a few different factors, but he’s watching either the end of this year or early next year before prices find the top.

“The real spike in prices will come when we do start that rebuilding process and we do start retaining heifers,” says Peel. “That's what squeezes slaughter in the short run, and we're not sure when that's going to happen. It still depends on the drought, but it could certainly start this year. It's either late 2023 or into 2024 when we get that real spike in prices, and Don's absolutely right with there's no doubt we will see record prices for both feeder cattle and live cattle.”

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