If you ask James Mitchell about the bright side of the 2022 drought, he’ll tell you this: Better now than then.
“I’d much rather be having the conversation about current prices than about what they were one or two years ago,” Mitchell said on Jan. 23, addressing about two dozen attendees at the year’s first livestock and forage production meeting, held in Friendship, Ark.
Mitchell, Extension livestock economist for the University of Arkansas System Division of Agriculture, said market prices for beef cattle are now significantly higher than they were in 2022 and earlier.
“Relative to the past couple of years, we’re starting off the year with much higher cattle prices in Arkansas,” Mitchell said. “For a 500-pound steer, we’re talking about prices that are $25 per hundredweight higher, compared to last year. That’s a significant increase, at least in Arkansas and the southeast. We’d probably have to go back to 2015 to find a similar scenario for Arkansas cattle prices.”
Market data from the U.S. Department of Agriculture, Arkansas indicates steers weighing 500-600 pounds have been fetching nearly $2/lb. in January.
The prices are a direct result of drought conditions that dominated agricultural production, from livestock to row crops, in much of the country last year. Most of the Midsouth saw significant reduction in hay production in 2022, according to USDA. Hay production in Arkansas, for example, fell 16%, to about 2.2 million tons. Texas suffered the most dramatic reduction, falling by 40%.
As hay and forage availability dwindled, many cattle producers in Arkansas and elsewhere cut deeply into their herds, slaughtering or selling off cattle they could no longer afford to feed.
“The overall forecast for the remainder of this year is that we’re going to see those prices move higher, purely from a supply standpoint,” Mitchell said. “We just have so many fewer animals than we did even a year ago. It’s really hard to overstate how impactful the drought has been, in terms of the hard decisions that had to be made, leading producers to sell large chunks of their operation because of lack of grass and lack of hay.”
As recently as 2022, USDA’s National Agricultural Statistics Service ranked Arkansas 17th in the nation in cattle and calf inventory, with an estimated 1.7 million head, and 11th in the nation in beef cattle inventory, with an estimated 905,000 head. The agency’s next biannual Cattle Inventory report in expected Jan. 31.
In July, NASS reported that the national beef cattle inventory had fallen by 2%. Mitchell said that he and other economists expect the Jan. 31 report to reflect a further decline of at least 4%.
So, while many producers in Arkansas and elsewhere may have less to bring to market, those that do have stock to sell will have the opportunity to cash in on higher earnings. However, Mitchell warns, those expectations hinge on the purchasing power of the American family.
“The single biggest thing I’m monitoring is what’s happening to the U.S. consumer,” Mitchell said. “The extent to which tight supplies lead to higher prices operates on the assumption that we’re not going to have any large erosion of consumer beef demand. You need to have both.”
Mitchell said that beef exports and trade could be a ‘wild card’ in 2023.
“Just from an economist’s perspective, even trying to figure out what’s going on in the U.S. economy can be quite challenging,” he said. “When you’re trying to do that for other countries, it can be a more daunting task. The United States isn’t the only country battling macroeconomic concerns.”
China, for example, is the world’s leading beef purchaser. The country’s decision in December to reverse its “zero COVID” policy led to mass infections across China, the market ramifications of which remain to be seen.
“The policies pursued by other countries can have important implications for the U.S. beef trade,” Mitchell said. “Forecasts from USDA call for lower beef exports in 2023. Those expectations mainly reflect lower expected production. You can’t export what you don’t have.”
To see a calendar of upcoming cattle and forage production meetings, visit https://bit.ly/AR-Forage-Livestock-Sked-23.
Source: University of Arkansas System Division of Agriculture.