If the cattle industry — or, really, the agriculture industry as a whole — had to choose a few key words to summarize 2022, there is no doubt that “drought,” “input costs,” “economic headwinds” and “methane emissions” would be near the top of the list. The past year was continuously filled with uncertainties, but just as those involved in agriculture have always done, from one generation to the next, we continue to survive and, ultimately, thrive.
The last few years have been especially tough on cow-calf producers, most notably due to droughts and elevated feed costs. As a result, liquidation of the beef cowherd has taken place, which will be felt for years to come, with tighter supplies of feeder and fed cattle. At the recent CattleFax Strategies and Outlook Annual Meeting, experts predicted that cow-calf profitability will increase again in 2023 to the best levels seen since 2014 and 2015. This will help drive an increase in revenue. Increased profitability at the cow-calf level will allow for the expansion of the cowherd once again and will help improve supply moving forward, leading to a more sustainable and healthy industry.
In addition to the cow-calf segment, current projections also indicate profitability for all segments in 2023 — including stockers, fed cattle and packers — being driven by strong demand and production efficiencies. Even though the packing segment has been the largest beneficiary in recent years, tighter cattle numbers will continue to allocate higher margins for the cattle-producing segments. In the coming years, more plants are expected to be entering the market, leading the industry to reach an equilibrium of plant capacity and fed cattle numbers. CattleFax has estimated that, by 2026, 4,500 head per day of new fed cattle capacity will come online.
With fed cattle, the beef-on-dairy market continues to grow and is providing a better and more consistent product compared to years past. Additionally, within the fed cattle market, record heavy weights continue to roll into the processing plants — but cattle aren’t grading as well, which may be attributed to changes in the diet (i.e., taking tallow out of the diet), as well as the cattle experiencing stress at some point over their lifespan. If we think back on the last couple of years, droughts have impacted a large portion of the country, and the impacts of the nutritional stress cattle experience — a negative effect of fetal programming — are showing up on the rail. Although demand has been strong, there is no doubt that consumers’ focus will still be on high-quality-grade beef.
Shifts in weather patterns?
Looking ahead, input costs — including energy and fertilizer — will continue to be our biggest challenge, in addition to the economic headwinds we will face. The droughts we have experienced in recent years due to the La Niña weather pattern haven’t helped the situation either. This is our third winter in a row with La Niña, and three-peats are very rare for this system, but the weather is expected to turn around. Weather experts are predicting that La Niña will weaken and transition to the El Niño pattern in the summer months of 2023, which should bring better conditions across much of the country.
In addition to the weather, the second half of 2023 is potentially expected to bring with it softer grain prices going forward. When looking at corn in particular, production in China is catching up to demand. Additionally, ethanol usage has created less demand due to fuel prices and remote workers, and the decline in cattle supplies has also resulted in less demand, although hog numbers are stable and the demand for poultry has increased. The long-term trend of increased yields will remain; however, good weather will be needed to assist producers with a positive yield potential.
2023 and beyond
As we reflect on the past year and look forward to what the future holds, it is important to note that discussions about carbon and methane will not be going away. These are topics we will need to gain a better understanding of and will be expected to learn more about moving forward, as they will continue to be the focus of research and will need to be addressed, both in relation to our operations and our stores and simply in terms of how we live day-in and day-out.
We will also need to learn to adapt to worker shortages. There are too few workers in the industry today, and the normal demographic profile is shifting, with the boomer generation — the largest segment of our workforce — retiring and the next generation entering the workforce being substantially smaller. This demographic shift and worker shortage was highlighted at the CattleFax Outlook Meeting, where the take-home message was about learning how to adapt to this “new normal”. The minimal time and labor requirements of self-fed CRYSTALYX® Brand Supplements can be part of the solution to the shrinking workforce on your operation while still delivering the nutrients your cattle need day-in and day-out.
Wishing you a Happy New Year
While we will surely face challenges in the year ahead, there is a lot to look forward to, as the CattleFax Meeting indicated. Each of us at CRYSTALYX® Brand Supplements thank you for your business, and we look forward to continuing to work together to achieve your goals in the upcoming year and beyond.