Recent USDA reports in July of inventories of Cattle and in November of Cattle on Feed show cattle numbers are declining. Drought in many areas has led to beef cow liquidation and more heifers in the slaughter mix. 

The Livestock Marketing Information Center (LMIC) projects the January 1, 2023 national beef cow herd to be more than 4% below the January 1, 2022 level. This would make the U.S. beef cow herd smaller than in 2014, which was the last bottom in the cattle inventory cycle.

There are fewer feeder cattle available, fewer being placed in feedlots, and a larger share of those have been heifers, which means continued tight fed cattle supplies going forward. 

Nationally, November 1 cattle on feed numbers in feedlots with 1,000+ head capacity were the smallest for November since 2018. In Iowa, November cattle on feed numbers, in all feedlots, were the smallest for November since 2014. 

This was due to quite small inventories in feedlots with less than 1,000 head capacity while inventories remain relatively robust in feedlots with 1,000+ head capacity. Tighter cattle supplies will be supportive of prices. As is always the case, demand will be an important focus for market participants and a key cog in how high prices can, and will, go.

Current price situation and outlook

For the week ending November 26, the combined Iowa auction price of 550-pound, medium & large, No. 1 steers was $202.44/cwt and the price of 750-pound steers was $173.17/cwt. For that same week, Iowa-Minnesota, negotiated purchases of live FOB (Free on Board (FOB) is a shipment term indicating the point at which a buyer or seller assumes ownership and liability for goods being transported.) steers over 80% Choice averaged $156.31/cwt.

 USDA’s Economic Research Service (ERS) and LMIC have price forecasts for feeder cattle and fed cattle that are based on market fundamentals. They also like to use basis adjusted futures prices as a forecast. Futures markets account for all public and nonpublic information in determining an equilibrium price in the market. For example, the current April feeder cattle futures contract price is the market’s current best guess of what the actual price will be in April 2023. Including a basis expectation (i.e., Basis = Cash Price – Futures Price) helps localize the price forecast.

The USDA-ERS forecasts for feeder cattle are $177, $190, and $214, respectively, for the first three quarters of 2023.

 Price forecasts are in $/cwt. LMIC forecasts are more subdued, with prices ranging from $179 in the first quarter to $186 by the fourth quarter of 2023. Feeder cattle futures prices, adjusted for an Iowa basis, show an uptrend from $182 to $207 by the end of 2023. A composite 2023 price forecast for feeder cattle is $193 which would be 14% higher than the 2022 average.

USDA-ERS forecasts for fed cattle are $153, $154, and $155, respectively, for the first three quarters of 2023. LMIC forecasts start at $150 for the first quarter of 2023 and jump to $155 by the second quarter and are expected to remain at the level throughout 2023. A composite 2023 price forecast for fed cattle is $156 which would be 8% higher than the 2022 average.

Recently USDA provided early-release tables for their Agricultural Projections to 2032. Similarly, the Food & Agricultural Policy Research Institute (FAPRI) provided an update of their 2022 long-term baseline to reflect information available in mid-August 2022. USDA expects peak fed cattle prices to occur in 2023 while FAPRI expects peak prices in 2026. LMIC expects peak prices to occur in 2024 or later. One takeaway from this disagreement points to being cautiously optimistic about prices going forward. This may favor using put options or livestock risk protection insurance as a primary strategy, establishing price floors in the process and allowing for upside potential.

Costs were a headwind to producer returns in 2022 and they will be again in 2023. According to the Iowa State University model for finishing yearling steers, feeding costs increased 30% or $23/cwt in 2021 compared to 2020. Costs increased another 19% or $19/cwt in 2022 compared to 2021. Costs are forecasted to remain at, or slightly above, these record levels in 2023. Feeding costs were $77/cwt in 2020, $100/cwt in 2021, $120/cwt in 2022, and forecasted to be $121/cwt in 2023.

Being prepared is key. Regardless of your agreement with this market outlook for the beef cattle industry, or someone else’s, you should stay informed and make use of available resources to help guide decision making throughout the upcoming year. Though it’s true that you cannot plan for every single issue in advance, there are always unforeseen circumstances that add market price risk and using tools to help mitigate price risk based on an operation’s risk bearing ability is important. In general, it’s better to be proactive than reactive.

The following is a list of available resources that may help you with your marketing decisions:

• Ag Decision Maker. In particular see the Livestock drop-down for Costs & Returns, Markets, and Outlook & Prices.

• Iowa Beef Center. In particular see the Tools drop-down for Apps and the Crush Margin Calculator link.

•  Estimated Livestock Returns. A monthly barometer of cattle feeding costs and returns.

• Livestock Crush Margins. Weekly cattle crush margins and tracked changes serving as an indicator of risk management opportunities.

• BeefBasis. Provides fast and easy access to the information and tools needed to improve buying and selling decisions.


Cattle Market Outlook and Price Risk Management Thoughts Heading into 2023, Russ Euken, ISU Extension Livestock Specialist and Lee Schulz, ISU Extension Livestock Economist