Hopeful weather forecasts, more liquidation, and a margin realignment: 2023 in the cattle markets


We’ve got some supply issues in the cow/calf sector, and we need to rebuild the U.S. cow herd. This is the message that Kevin Good, vice president of CattleFax, is sharing this week at the National Cattlemen’s Beef Association Conference (NCBA) at New Orleans, Louisiana.

After four years of massive liquidation across parts of North America, and what’s looking at potentially another year added to that, the supply side of the cattle market is getting very tight, due to the damage already being done for the short-term future.

As Good explains in his conversation with RealAg Radio host Shaun Haney, timing is everything.

“Over the next while, we’ll have a huge turnaround from a leverage margin shift, which is already taking place. The cattle producer has had the short end of the stick, so to speak, compared to record high beef demand and dollars at retail,” he says. “Now, we’re in the process of more of those dollars trickling back down to wholesale and back to the cow/calf producer. That trend will continue over the next four or five years.”

Related: U.S. beef herd the smallest its been since the 60s

As supplies continue to tighten up across North America — Mexico is exporting less feeder cattle to the U.S. as they increase their own slaughter capacity, and Canada hasn’t participated in a heavy cow cycle since BSE — it begs the question: where on earth are all these feeder cattle going to come from?

If you consider when we have faced tight supplies in the past, there were numerous packing plants that had to go offline. As Good says, this is a risk we always have to be aware of in these situations.

With potential for a weakening La Niña, there is hope for more grass this year, which is ultimately what the cattle sector needs to loosen up supplies a bit. There may be optimism from meteorologists across the country, but we still of course have to be cautious. However, as Good notes, going from bone dry to a neutral year will still be helpful.

“With that as a forecast, we would still say hey, we can at least stop the liquidation by the end of the year. But the die is cast: this year is going to be a liquidation year, just because of the way we have started.”

As noted, leverage changed tremendously in the last year. This year, Good is expecting another three per cent swing, which amounts to another $120 swing, creating a positive margin realignment. “With tighter supplies, the packer will be able to squeeze some margin back out of the retailer.”

Check out the full conversation between Good and RealAgriculture founder Shaun Haney, below:

Find more NCBA coverage, here.

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