Last week's Cold Storage report was eye opening for the cattle industry. The weekly battle between packers and feedlot managers has been invigorating, as so many believed the cash cattle market's ability to shepherd the market to true price discovery could have been a thing of the past. However, if there's anything that this bull run has taught us, it's that we need the cash cattle market to truly maintain transparency and true price discovery.
As cattlemen, we understand the dynamics of our business -- keep operating costs low, overheads manageable and sell high. But packers have even more of a structured business than we do and, truthfully, they watch their numbers and margins far more closely than most cattlemen do. With that said, it should come as no surprise packers have been scrapping week in and week out to get ahead of the cash cattle market and pump the brakes on its rally.
When I read last week's Cold Storage Report and noted total pounds of beef in freezers was down 3% from a month ago and down 20% from a year ago -- there were a couple of realizations I came to.
First, it was that packers are going to have to stay engaged in the cash market to have enough product to serve retailers. We've known since the beginning of the year that supplies were only going to tighten more in the second half of 2023, and even with packers running reduced kill speeds, their need for market-ready cattle is high.
Second, so long as beef demand remains as strong as it was in the first half of the year, the cash cattle market should have no issue remaining elevated.
If July's World Agricultural Supply and Demand Estimates (WASDE) report rings true, none of these points should be an issue.
On July 12, the most recent WASDE report shared that beef production for 2023 was increased by 75 million pounds, as both fed cattle and non-fed cattle slaughter was increased for the second half of the year. Quarterly steer prices for 2023 were increased as well, as the third quarter is expected to now average $178 (up $5.00 from June's report), and the fourth quarter is expected to average $183 (up $9.00 from June's report).
I'm in awe of what the cattle market has accomplished thus far this year and I remain encouraged for what could be in store for the second half of 2023 as the market only seems to grow stronger and bolder. Yes, consumers are facing extremely high beef prices, and interest rates continue to climb higher, but the market has yet to wave its white flag -- and I don't believe it will anytime soon.
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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