Financial planning when considering a high cattle market and high production costs
At Missouri Southern Seed, we consider ourselves a partner to producers across the state. We’re your local experts for determining the best forages and grasses for your growing area. However, there is a whole lot more to a successful operation than growing quality grasses for your herd.
You’re also tasked with managing pasture rotations, keeping toxic weeds at bay and getting the most out of your forage. Then, there’s the whole other world of raising cattle, managing calving and breeding seasons, updating nutrition programs and the ever important financial planning… and this is where we call in the experts.
Because we are so close with the cattle industry, we have a lot of side conversations that don’t necessarily have to do with seed, yet greatly impact our customers. We reached out to Dr. Scott Brown, Associate Extension Professor of Agricultural Economics for University of Missouri Extension, for financial planning advice as we head into 2024.
With a historically high cattle market, many producers are weighing their options to determine if they should take advantage of the current prices or hold out for a higher payday. Higher overall production input costs are also top of mind and, after another long drought season, some producers aren’t sitting on as much quality hay as they’d like.
Here are a few questions we asked Dr. Brown about what producers should account for when making their 2024 plans:
Q. Right now, the cattle market is at an all time high. How long do you foresee the trend to continue and why?
A. It appears that cattle prices will stay at or near record levels for several more months, as beef supplies look to remain lower at least through 2025. The USDA currently projects beef production will decline by 1.8 billion pounds in 2024 relative to this year. This follows a 1.3 billion pound decline in 2023 relative to 2022. This large back-to-back decline has not happened in recent history. The major factor that could derail this optimistic projection is a reduction in beef demand.
Q. Would you advise producers to take advantage of this historical market and sell more cattle to avoid the higher input and production costs we are experiencing related to the drought?
A. Producers must look at their operations to determine how to best market cattle moving forward. Those with adequate forages may decide that keeping cattle longer may provide them with even higher prices even though record prices are occurring today. Those without enough forage supplies will want to be more aggressive in selling cattle today to reduce their need to purchase high-priced forages.
Q. What potential downsides could producers experience if they liquidate more animals this year than normal?
A. If producers aggressively liquidate cattle this year, they could miss out on even higher cattle prices in 2024 as beef supplies continue to contract.
Q. What variables should producers be considering when planning their 2024 operating budget?
A. Plan for all input costs to remain at high levels in 2024. Producers should consider risk management costs to reduce the risk of lower cattle prices or higher input costs in their budget projections. There is considerable volatility in input costs and cattle prices, and producers should expect that volatility to continue in their budget planning.
Like anything in economics, the answer is dependent on your operation and financial ability to carry stock or provide forage until higher prices come. But one thing is for sure: Missouri Southern Seed will always provide high quality seed you can count on.