This year has certainly brought challenges to not just producers but everyone. The continued drought forced many to liquidate their herds at unseen rates. The record-high inflation made it more difficult for people to purchase even necessities. And to top it off the conflict in Ukraine ended up causing inputs like fertilizer to increase to astronomical levels.
I suppose we should spin all of the challenges we have faced into something positive. Just as a calm sea never makes a skilled sailor, stable markets never make a skilled producer. It is in dealing with challenges that we are able to expand our skills and improve. That being said can things finally turn around for us going into 2023? Here are 4 things to look at that could possibly answer that for us.
Will the drought continue into 2023?
Regardless of what the new year brings we will feel the effects of this drought for likely years to come. Thankfully in areas like where I am in Texas, we received some much-needed moisture over the last few months. Though some areas have gotten rain this drought is likely to continue for at least the beginning part of the year.
A major issue with these types of conditions is that hay will be hard to come by this winter. Due to the lack of moisture people were just simply not able to make enough. And any that could be baled was most likely already used because there is not enough forage on the ground to feed the cattle. If anyone was able to find any bales for sale they were extremely expensive. In order to make it producers had to get creative in finding roughage alternatives.
Relief in sight?
But relief could be on the horizon. according to projections by NOAA, the La Nina conditions should weaken in the 1st quarter of 2023. They have observed changes in the waters of the eastern equatorial Pacific Ocean that hint that it is finally starting to pass. This can mean improved soil moisture in the first part of 2023. Experts do say that if relief does not come in the spring it is likely to make an impact by late summer into fall.
Dealing with conditions like we have had to deal with is further proof of why having a drought plan in place is important for producers. The ideal time to develop a plan is when you are getting the rain, but the next best is the moment you realize you need it. A good producer should have a plan of what to do when the pasture does not get the needed amount of moisture by a certain date. Knowing that will tell you what steps that are needed to be taken to try to conserve as much of your forage as possible.
Market outlook for 2023
According to a consensus of market analysis across the country, cattle prices will be higher in 2023. Ranchers are uncertain whether these higher prices will lead to profitability. Consumer research reports are predicting beef prices to rise 15% next year till 2025. If we get the much-needed rain prices are likely to spike higher. This will be because of more heifer retention and reduced cow culling while people rebuild their herds.
What causes these potentially higher numbers is because of the herd liquidations that happened this past year. Beef cow liquidation is up 11.7% and heifer liquidation is up 4.9%. National beef herd numbers will be more than 4% lower than last year at this time. The total herd might be down 2.4 million head by the start of 2023. With these numbers, things will look good at the start but supply will be a problem as we get later in the year.
Another driver in prices going up is strong consumer demand. As we are moving out of all of the stuff from the Covid-19 lockdowns people are starting to eat out again. This, however, might change as the price of beef goes up and other proteins remain relatively the same.
With these potentially higher prices, it will be in the producer’s best interest to be as efficient as possible when feeding supplements. If they can carry their herd over to the next year they stand to make some considerable money. If you are interested in learning more about how to do that check out my previous post “5 ways to reduce winter feed costs”.
Input costs will likely remain high
The drought over much of the country has affected not just herd numbers but also input costs. Just the price of forages is up 30-40% this year. Grains, such as corn, are less in number as well because of the drier conditions. Currently, the price for corn is going currently for at least $6 a bushel. With these prices, it can be difficult for producers to make it.
The continued conflict between Russia and Ukraine is also having an impact. For starters, Russia is one of the largest exporters of Potash which is an important ingredient for fertilizers. Certain types also require petroleum, and the embargo makes it more challenging. The uncertainty of things has also made people a little leary in the markets.
Though they have been going down here the last couple of months fuel prices are also a problem. Tractors and even trucks need fuel to transport products from the field to the plate. Increased prices cut into the profitability of producers.
Interest rates and inflation are also important factors. There has been an increase in interest rates of up to 4% lately from the federal reserve. While this may seem like a lot, every indication indicates that these hikes are not over. This affects producers because many take out yearly loans to cover operation costs. They then pay them back when they sell their products. Higher interest rates will mean that they will have to pay back even more than usual.
Government Policies
This year, Washington will attract a lot of attention. The current farm bill will expire in 2023. An issue that we have seen is that this current administration seems more concerned with their “green agenda” than previous ones. Usually, these decisions aren’t based on science, but rather on political agendas.
Both the House and Senate passed a rather large omnibus spending bill recently. It is believed that the farm bill can be passed fairly easily due to the speed at which the bill was drafted In this bill there are earmarks for various conservation programs as well as different infrastructure “projects” that could potentially help people in rural America.