Westhoff: Biology suggests likelihood of higher 2023 cattle prices, including in Missouri

To understand markets for cattle and beef, it is important to remember a few simple things. Cows have calves. Calves grow up to become animals ready for slaughter, and the whole process takes time. This basic biology provides some clues for how cattle markets may evolve.

A recent report from the U.S. Department of Agriculture indicated that there were 2% fewer beef cows in this country on July 1 than there were a year ago. The same report also showed a 3% drop in the number of heifers (female cattle that have not yet had their first calf) that producers intended to keep to replace beef cows leaving the herd.

Cows only give birth once a year, so fewer cows now probably mean fewer calves born in 2022 and 2023. Fewer calves born will eventually translate into fewer animals ready for slaughter. All else equal, that means lower beef production, which usually implies higher cattle prices.

That relatively simple story is consistent with current USDA projections, which suggest a very sharp drop in beef production in 2023. In its July report, USDA projected that cattle prices would increase for the third straight year in 2023. Especially large was the increase in expected prices for the type of cattle Missouri producers send to feedlots in other states.

As important as this basic biology is, there are complications. For example, USDA expects beef production to be about the same this year as last year, even though July cow numbers have declined every year since 2019. Why hasn’t this drop in cow numbers translated into less beef production in 2022?

One part of the story is the drought that is affecting many western states and parts of Missouri. With inadequate forage, some cattle producers have little choice but to send some cows to slaughter and other cattle to feedlots earlier than usual. While that reduces future cattle numbers and beef production, it actually adds to beef production in the short term.

Even if the number of animals slaughtered declines, it does not necessarily mean less beef is produced. The average carcass weight of slaughtered animals varies from year to year based on a wide range of factors, including the type of animals entering feedlots and the relative prices of cattle and feed. Over the last decade, there has been a significant increase in beef production per slaughtered animal.

Another complication is trade. The United States imports about 2 million head of cattle each year from Mexico and Canada, and if that trade changes a lot from year to year, it can affect beef production. 

Finally, of course, cattle and beef prices depend not just on supply but also on demand. In 2022, demand for beef has been strong, as domestic and foreign consumers have continued to buy about the same amount of U.S. beef in spite of higher prices.

While basic biology suggests higher cattle prices in 2023, these various complications mean a lot of uncertainty remains. A recession could result in weaker consumer demand, or there could be major shifts in trade. Even the underlying estimates of cattle numbers may prove incorrect. Higher cattle prices in 2023 appear likely, but are far from a sure thing.

Pat Westhoff is director of the Food and Agricultural Policy Research Institute at the University of Missouri and a professor of agricultural and applied economics. The opinions expressed here are his own and do not reflect official positions or endorsements of the University of Missouri.