22 Nebraska Cattleman December 2023 Are Higher Interest Rates Holding Back Herd Rebuilding? By Dave Weaber, Senior Animal Protein Analyst, Terrain Cow herd rebuilding in the current cycle has yet to begin, and it appears that 2023 will be another year of net beef-cow herd liquidation. Any producer plans of heifer retention seem to be a far-off proposition facing a number of headwinds. Not the least of these is the added interest cost in the beef supply chain due to the higher interest rate environment of the past 20 months or so. While it is easy to calculate the shortterm impacts on the various producing segments (cow-calf, stocker, feedlots) from these added costs, it is harder to recognize the way these costs shift through the supply chain and get covered in the long term. Cattle producers throughout the supply chain should be factoring interest rate cost and risk into the majority of their business decisions. Rising Rates and Risk Recent Federal Reserve data on national non-real estate agriculture loan activity shows that the average effective interest rate had risen to 9 percent for new loans for stocker and feedlot cattle during Q3 2023 and was up to 7.5 percent for new loans in the “other” category, which includes breeding stock on cow-calf operations. For stocker and feedlot cattle, this was a 4 percent increase compared with a year earlier and a 5.5 percent jump vs. Q1 2022. The same comparisons for cow-calf operation interest rates reveal increases of 2.4 percent and 3.6 percent, respectively. For comparison, the quarterly average federal funds rate increased 5.14 percent from Q1 2022 through Q3 2023. On top of the rise in interest rates, an increasing percentage of new loans CONTINUED ON PAGE 24
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