2023 cattle industry outlook: Some optimism but not a home run
Weather prospects and potential profitability dominated my hallway conversations with cattle producers and industry representatives at the recent 2023 Cattle Industry Convention and National Cattlemen’s Beef Association Trade Show in New Orleans.
Most producers reported positive outcomes in 2022 and expect some level of profitability again this year. But many added that ongoing drought, high input costs and interest rates, and consumer uncertainty, are likely to squeeze their margins in the months ahead.
Those expectations were echoed during the convention’s popular CattleFax Outlook Seminar. For the upcoming year, CattleFax foresees favorable prices and profitability for cattle producers, although not as strong as 2022 levels. In its industry outlook, CattleFax highlighted these factors:
• The smallest cattle supply since 2015 should be bullish for prices. The United States beef cow cattle inventories have dropped 1.5 million head from cycle highs. The 2023 beef cow herd is expected to fall about 1 million head more to nearly 29.2 million. The drought largely accounted for the reduced supply, forcing the industry to rely more heavily on fed cattle and calves. Smaller cattle numbers and lower beef production will likely drive prices higher for all classes of cattle and sharply slow beef cow culling through 2023.
• The La Niña weather pattern will fade by summer, bringing potential drought relief. That should mean improved growing conditions and healthier soils in the western U.S. That may also translate into moderating feed costs, especially in the second half of 2023. Meteorologists believe a “neutral” phase will follow, with the possibility of El Niño developing in the fall, which could bring storminess to much of the U.S.
• Economic uncertainty may limit consumer purchases. Along with inflation and rising interest rates, the wavering U.S. economy could result in reduced spending. Many economists expect the economy to slow in 2023, with a mild recession possible in the second half of the year. Despite these challenges, a tight labor market and low unemployment should continue to support consumer incomes and spending power in 2023.
How to prepare
While we’re all hopeful that 2023 will see continued producer profitability and potential drought relief, I don’t expect a home run for cattle producers this year. That means it’s important to closely manage your operation’s finances and risks.
Smart producers will keep their eyes on their margins. They’ll insure for production, livestock and property risk. They’ll protect their price. They’ll safeguard their employees, family members and themselves. They’ll keep the lines of communication open with their lenders.
They might also use this time to focus on employee training or succession planning. They might invest in technology to improve financial and accounting systems or help with matters like inventory control. They may take a closer look at their cybersecurity plan or disaster preparedness. They’ll find the time to know their cost of production and understand marketing windows. They’ll meet with their certified public accountants to make sure they understand the best tax considerations for their beef operation.
Although the 2023 cattle outlook is fairly optimistic, we all know that volatility is part of agriculture. Weather takes surprising turns. International events upturn the status quo. Markets shift suddenly. Being prepared is always a good move, even when the sun is shining.
Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies, or protect the current owners’ legacy through careful structuring and estate planning, Max applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at [email protected].
