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Michigan's Cattle Challenge - Navigating Declining Herds and Farming Opportunities
Michigan Ag Connection - 02/08/2024

The decline in cattle inventories in Michigan and across the United States is attributed to several factors, as highlighted in the Market Intel report by AFBF Economist Bernt Nelson. Here are key factors contributing to the smallest cattle inventory in 73 years:

β€’ Drought and High Input Costs:

β—‹ Drought conditions and elevated input costs have compelled farmers to sell a higher-than-normal percentage of female cattle.

β—‹ This trend is particularly concerning as it affects the replacement heifers, which are crucial for maintaining and growing the cattle herd.

β€’ National Trend of Declining Inventories:

β—‹ The cattle inventory in the United States has been consistently decreasing, reaching the lowest level since 1951.

β—‹ The calf crop has also decreased, hitting the smallest calf crop since 1948.

β€’ Cattle on Feed Situation:

β—‹ Despite historically low cattle inventories, the supply of cattle and calves on feed for market remains high.

β—‹ Cattle and calves on feed for market are at 14.4 million, up 2% from the previous year.

β—‹ This situation, described as a "strange situation" by Nelson, suggests that there are enough cattle currently available to meet market demands.

β€’ Record High Beef Prices Expected:

β—‹ The decline in replacement beef heifers indicates that there will be fewer cattle available to refill the supply chain when the current supply diminishes.

β—‹ This could lead to record-high beef prices in 2024 and 2025, as the industry reaches the supply bottom of the current cattle cycle. β€’ Production and Weight Factors: β—‹ Average dressed weights are at a record high, contributing to increased beef production.

β—‹ Despite higher weights, overall beef production is still below the levels of the previous year.

β€’ Impact of Marketing Female Cattle:

β—‹ Farmers marketing female cattle, particularly heifers meant for replacement purposes, has been a significant contributor to the contraction in cattle inventory in recent years.

β€’ Domestic and Global Demand:

β—‹ Despite higher prices, domestic consumer demand for beef remains strong.

β—‹ However, domestic consumer willingness to pay is expected to decrease in 2024, and global demand for beef lagged in the final quarter of 2023.

β€’ Feed and Input Costs:

β—‹ Input and supply costs present a mixed situation, with El NiΓ±o providing moisture and improving drought conditions.

β—‹ While corn prices are forecasted to fall, higher cattle prices increase the cost of purchasing cattle for expansion.

β—‹ Increased interest expenses for farmers due to higher interest rates may act as a barrier to expanding the cattle herd in the next few years.

A combination of environmental factors, economic considerations, and market dynamics has led to a decline in cattle inventories, potentially impacting beef prices and the overall cattle industry in the coming years.

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