High Interest Rates and Input Costs Put Pressure on Cattle Production

While pasture conditions have improved and feed costs have been declining as the drought eases, cattle farmers continue to sell off cattle in the face of historically low inventories. According to Brock Thorburg, managing director of agribusiness in the central region at BMO Commercial Bank, the higher interest rates and costs have deterred many from reinvesting in rebuilding herds.

The number of calves decreased by 2% from last year and they are at the lowest point since 1948, according to the American Farm Bureau Federation. Many producers choose to send their heifers to slaughter instead of keeping them for breeding purposes. Heifers currently account for 40% of the slaughter mix.

Producers’ profit margins remain pressured by higher prices and borrowing costs. According to the Federal Reserve Bank of Kansas City, interest rates on farm loans have tripled from the beginning of 2022 to the end of 2023.