11/02/23 Collision of Decisions

Drought and this cattle cycle have tracked hand in hand. Better put, drought has had its hand squeezing the throat of the cattle industry driving enough decisions to have a collective impact on the industry. Drought has driven herd liquidation for some time (5 years) forcing cattle to be put on feed and restricting the ability of ranchers to retain heifers. More heifers on feed have inflated the slaughter nix. The most recent cattle-on-feed report validated that drought conditions have yet to relent enough, long enough to allow the industry to restock. Placements exceeded trade expectations inflating numbers on feed. Many had concluded that prolonged liquidation had depleted available numbers. Guess not quite. Many think that the feeder cattle supply is tight now but the tightest feeder cattle supply for this cycle is still in the near future. After a protracted liquidation where the drought migrated around the US impacting herds, one would think that the liquidation would exhaust itself. Once stocking rates have been slashed, herds have been reduced to fit conditions. Many were ready to conclude that an equilibrium with the herd size and drought had been achieved. However, it will not be reversed until the drought is…