Cattle Numbers Historically Tight: When Does the Market Realize It?

Cattle producers liquidated their herds this summer with drought across much of cattle country.   They also faced poor pasture and winter wheat conditions.   So, what does that mean for the fall cattle run and the market outlook?  

Live cattle futures hit new contract highs on October 25 but have disappointed the bulls as they’ve been consolidating ever since.  Meanwhile feeder cattle futures hit contract highs in mid-August and have never retested the highs even with historically tight supplies.  So, when is the marketing hole finally going to hit?  Market experts tell me while its past due, there’s clues it will hit in 2023.  

With deep culling, daily cattle slaughter has continued to run in the 127,000 to 129,000 range and for the year slaughter is up about 1.5% over 2021.  Some of its the increased cow slaughter.  Mark Schultz, Northstar Commodity says, "Your beef cow slaughter is still running high 83,000 a little over 83,500 last week.  You’re on pace to have an all-time record of the most beef cows slaughtered in this country for the calendar year of 2022."

Cow slaughter should start to taper off soon and with large feeder cattle runs through the summer and fall those numbers have started to tighten as reflected in the price.  Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist says, "Starting in mid no mid-October. We did see it start to see some year over year decreases in the feeder cattle runs. And we've also seen prices improve in the last half of October and going into November. We've seen a significant recovery and the prices I've certainly the fall low, I think is already in."  He says the biggest feeder numbers come late November and December, but he thinks more moved early in the south.  Peel says, "I think there's a good chance that we'll be a little bit smaller than usual as we finish out this fall calf run."  

So, when will the tighter numbers start hitting the live cattle market?  Brad Kooima Kooima Kooima Varilek says one key will be when heifers start being retained instead of placed in feedlots, but likely first quarter 2023.  He says, "So I remain supply side optimistic for the next year or so maybe by April we could get this market on top of 160 if it falls right in my opinion."   And he’s more bullish longer term.  "I think someplace in the next 12 to 16 months we’re going to a place of all-time highs, which is 174."

That’s barring a black swan or economic event to hurt demand.  Tighter numbers are also anticipated in Friday’s Cattle on Feed Report with on feed estimates down 2% and placements down 4%.  At the same time, even with higher feed costs the latest Sterling Beef Packer Tracker has average profits of $222 per head for cattle feeders, the highest since late April.