The increase in beef production indicates a continued contraction in the cattle industry

The year began with the start of cattle inventories estimated to be down 2% due to a 2.3% year-over-year 2021 calf crop, mainly due to drought pressures and high input costs for feed, fuel, fertilizer and labor. . This Market Intel gives farmers and ranchers a snapshot of what’s happening with the U.S. cattle herd as we head toward the 2022 finish line.

Drought and Input Costs

Drought and high input costs affect livestock marketing and processing. Drought has had a significant impact on pasture and rangelands this summer, especially in the Western and Southern Plains. When drought causes reduced grazing conditions, heifers (female cattle that do not produce calves), usually kept as breeding replacements, are placed in feedlots for final slaughter. High input costs have been another drag on farm profitability and have encouraged livestock producers to sell more cattle.

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Rain in recent days has improved pasture and pasture conditions in some areas. Pasture and pasture conditions for the week ending September 25, 2022 improved slightly during the week, with 57% of acres in 48 states in fair to excellent condition, a nearly 3% improvement over this time last year. This should encourage some farmers and ranchers to keep calves for replacement. However, it should be noted that it will take some time for pasture conditions to return to pre-drought conditions.

Production

Beef production in August 2022 was a record 2.51 billion pounds, up 6% from the same period last year. Cattle slaughter increased by 7% compared to August 2021 and amounted to 3.08 million heads. The total slaughter of cattle for 2022 was 22.49 million head, which is 1.8% more than in 2021. The cattle slaughter is 905,000 heads, more than 30% of the total slaughter, more than 9.3%. August 2021 and is 6.2% higher than the five-year average. Cow (female cattle with multiple calves) slaughter is estimated at 6.8 million head, up 6% from last year. Cow and heifer slaughter is especially important because these female cattle are responsible for the future calf crop. Cow and heifer slaughter accounts for approximately 51% of all cattle processed between January and August 2022. Increased cow and heifer slaughter rates lead to lower calf yields and reduced future cattle supply. Due to the time it takes for a calf to reach market weight (18-22 months), fewer calves can mean a smaller cattle inventory for future years.

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Cold Storage and Food Prices

High beef production has led to an increase in beef in cold storage. In its September Cold Storage report, the USDA estimates that beef in freezers rose 1% in August to a record 515.67 million pounds. This is 24% more than the same period in 2021. The US Bureau of Labor and Statistics released the August 2022 Consumer Price Index on September 13. The Consumer Price Index for all food products increased by 0.8% between July and August 2022 and across all food prices. It was 11.4% higher than in August 2021. As food inflation continues, record levels of beef in cold storage will help lower retail beef prices in the coming days.

Export

As of September 15, 2022, the total volume of beef exports increased by 1.8% compared to last year and amounted to 682.6 thousand tons. Beef exports to China, estimated at 35,800 metric tons, rose sharply this week. US beef exports to China totaled 116,000 metric tons, up 6.7% from this time last year. Beef has been China’s biggest meat import since 2021, with record levels of beef entering the country in a matter of weeks.

Although exports are slightly above last year, they may start to slow down. One of the reasons for this is the strengthening of the US dollar. The US Federal Reserve raised benchmark interest rates by 75 basis points on September 21, hinting at more hikes by the end of the year. This news caused the value of the US dollar to strengthen against other foreign currencies such as the euro, the Canadian dollar or the Japanese yen. This makes it more expensive for countries to buy beef and other products from the U.S. and may prompt our export customers to look elsewhere for a better deal.

Cattle in feed

The USDA’s Cattle On Feed report for September, released on September 23, 2022, showed a total of 11.3 million cattle and calves on feed as of September 1. While that’s slightly more than last month, it’s the second-highest month on record since the report began in 1996. In August, placing cattle on feedlots was a little more than last month, it was 2.11 million head. Marketing is the biggest story in this month’s report, at 2 million, up 6% from this time in 2021. Continued high cattle inventories in feedlots combined with high-end fed cattle for sale will factor into the overall cattle inventory, and the USDA’s National Agricultural Statistics Service will release its two-year cattle inventory near the end of January 2023. veal product when done.

Summary and Conclusions

August 2022 was a record month for beef. A record monthly production with an increased slaughter rate resulted in a record amount of beef in cold storage. The cut in August 2022 was 7% higher than the same time in 2021. USDA projects total cattle slaughter for 2022 up 1.8% from 2021. Production is expected to slow in the fourth quarter, but will likely be offset by higher-than-expected domestic output. The first three quarters of 2023. Cow and heifer slaughter continued to increase due to drought stress and high costs of supplies such as feed and fertilizer. Continued growth in female cattle placed on feed for processing will result in an even tighter cattle inventory for years to come. This is a strong indication that the cattle industry continues to be in a contraction phase of the cattle cycle.

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