Calf prices strengthen, cattle herd shrinking

COLLEGE STATION, Texas — Texas’ cattle herd numbers continue to shrink, but calf prices remain strong, according to a Texas A&M AgriLife Extension Service expert.

Future cattle prices could hinge on weather and subsequent grazing availability and/or input costs, such as grain, said David Anderson, Ph.D., AgriLife Extension livestock marketing economist, Bryan-College Station. Retail beef prices could be influenced by beef imports and the largest amount of beef in cold storage since 2016.

However, future cattle and beef prices hinge on long-term size of the U.S. herd, Anderson said.

Calf prices remain strong, and the market experienced recent increases, but Anderson expects herds to continue to shrink in 2023. He expects calf and beef prices to climb, but it could be 2024 before the market pushes them toward new records.

“We’re getting there in terms of fewer animals and calves, but demand for cattle and beef hasn’t been subject to a supply-demand imbalance that could really impact prices,” he said.

Calf prices stay strong, consumer demand steady

So far, there has been no real change in beef demand, Anderson said. A record amount of beef – 28.3 billion pounds – was produced in 2022 on the heels of deeper than usual herd culling by Texas ranchers, according to the U.S. Department of Agriculture. The agency also reported 544 million pounds of beef in cold storage, which is the second highest since tracking began in 1973.

Demand for hamburgers and steaks remains steady despite inflation and interest rate hikes by the Federal Reserve, which have slowed the economy. But Anderson said he wonders at what point might consumer demand for beef decline as shoppers look for cheaper options and how any decline might impact cattle prices.

Calf prices in the Southern Plains market were $2.31 per pound compared to $2 the same time last year and the five-year average of $1.69 per pound for 500–600-pound calves. They were even higher – $2.42 per pound – at the 400–500-pound weight class compared to $2.16 per pound last year and the five-year average of $1.87 per pound.

Feedlots are buying steers amid strong cutout value, Anderson said. Cutout relates to the value average across seven major primal cuts, including chuck, loins, ribs and briskets, at wholesale.

Cutout values were relatively flat – $2.76 per pound – compared to $2.70 per pound in 2022, but 30% higher than the five-year average of $2.12 per pound. Anderson said retail beef prices were down slightly compared to last year.

“People are still buying beef, and that’s a good thing,” he said. “We had a lot of beef out there this past year, and the runups in calf prices at that point were related to higher production costs in relation to calf prices.”

Market imbalance likely leads to higher calf and beef prices

The high cost of grains and other supplemental feed coupled with poor grazing and forage production led many producers to cull before costs surpassed the profit potential of strong prices.

Despite widespread rain over recent weeks, many parts of the state continue to experience extremely dry conditions, according to the U.S. Drought Monitor. Around 77% of Texas is dealing with some degree of drought, and 31% of the state is in severe to exceptional drought.

Producers in many areas continue to reduce cattle numbers or liquidate herds according to AgriLife Extension agent reports. But agents in other parts of the state are reporting vastly improved soil moisture conditions.

There is an expectation that grazing on native grasses or improved cool-season grasses like winter wheat and ryegrass could boom with sunny days and warmer temperatures.

“It will take everyone deciding the drought is over before the Texas herd begins expanding again,” he said. “Some producers with good moisture and grazing may take on more calves to take advantage of the opportunity for good low-cost gains. That could drive calf prices up some more, but I still don’t think that causes an imbalance.”

The market “imbalance” scenario is likely to play out like the last statewide drought in 2011, Anderson said. Prolonged drought and an arid summer with poor grazing, hay production and limited water resources led Texas cattle ranchers to cut the state herd from almost 5 million to 3.9 million by 2014.

Anderson said prices were strong after 2012 but by 2015, calf prices were setting all-time records as ranchers moved to rebuild their herds and take advantage of strong consumer demand and reduced supply, thus driving beef prices upward.

“I don’t expect price escalation to happen until we rebuild the herd,” he said. “That means producers are holding back more heifers to replace cows, and so there will be fewer head ending up in grocery stores. That process really constricted the beef and cattle markets and drove prices up.”

–Adam Russell
Texas A&M AgriLife Communications