Butter prices were out-of-sight in 2022, hitting a record-high $3.2675 per pound in Oct and averaging $2.87 for the year, up 65.5% from $1.73 in 2021. Butter production in 2022 was down 0.7% from 2021 and 10.1% below 2020 output. But cold storage stocks at the end of Dec were 8.1% above year-ago, suggesting high prices suppressed at least some demand - and that there is enough supply to keep prices relatively tame.

A big boost to Q4 2022 broiler output has pushed Jan 1st (2023) cold storage supplies to 25.4% above a year ago. Producers were finally able to significantly increase output – but at a time when sky-high retail prices were turning off consumers and demand was falling. Breaking it down: wing inventories were up 11%; whole birds up 14%; leg quarters up 22%; and breast meat 63% higher than last year, albeit coming off 9-year lows to start 2022.

U.S. GDP growth was 2.9% for Q4 2022, following 3.2% growth in Q3 2022. Those are great numbers after several years of Covid, supply shocks, war, and inflation. What’s next? The U.S. will flirt with recession for most of 2023 as a result to the Fed’s (inflation-fighting) interest rate increases. We’re only not in a recession right now because of a resilient labor market and unexpectedly lower energy prices.

In Friday’s monthly cattle report, the USDA said feedlot inventories totaled 11.68M head on Jan 1, down 2.9% from a year ago. New placements onto feedlots in Dec were down 8.0%. Heifers (breeding stock) accounted for 39.8% of feedlot inventory, far exceeding the 36% threshold that historically indicates herd liquidation. CME cattle futures set fresh 8-year highs at $158.50/cwt on 12/29/22 and remain high at $156.62 (1/20/23).

Highly Pathogenic Avian Influenza (HPAI or Avian Flu) claimed the lives of nearly 58M U.S. birds in 2022 - mostly turkeys & egg layers - and that trend will likely continue in 2023. Effective vaccination exists. Unfortunately, trade barriers that would exclude vaccinated U.S. poultry from several important foreign markets have discouraged domestic vax usage.

Making a call on the economy for 2023 has recently gotten even more difficult, in a good way. U.S. employers added a very impressive 223,000 net new jobs in December. The jobless rate dropped from 3.6% to 3.5%. And, while a number of financial and tech giants have announced large layoffs, most of these companies had staffed-up during the pandemic and are now just trimming back to 2019/2020 levels.

2022 was an ugly year for commodities. The La Niña climate pattern precipitated a 3rd straight year of drought, cutting U.S. crop yields and scorching cattle pasture. Avian Flu decimated egg layers and turkey flocks. The Ukraine war stoked prices for crude and refined oil products. For 2022, cattle prices were up 11.4%, winter wheat +12.1%, corn +13.4%, diesel +27.4%, turkey breast +133.1% and large shell eggs ended the year 189.1% higher than where they started.

In Friday’s (pre-holiday) cattle report, the USDA said feedlot inventories totaled 11.67M head on Dec 1, down 2.6% from a year ago. New placements onto feedlots in Nov were down 2.1%. Meanwhile, beef demand remained strong with cattle marketings up 1.2% from a year ago in Nov. That combination (and trend) of smaller on-feed supplies, lighter placements, and strong marketings should be bullish for cattle prices.

‘Twas the night before Christmas, and all through the White House, not a creature was stirring, when the Pres did arouse. Still dreaming of midterms and Herschel and Lake, the news was too good, it had to be fake. Then up on the roof there rose such a clatter, Joe sprang from his bed to see what was the matter. When what to his wondering eyes should appear, ‘twas Santa alone, no sleigh and no reindeer.

It’s a holiday miracle! Just in time for the peak shopping season, crude oil and gasoline prices have plummeted – giving inflation-weary consumers a welcome reprieve. WTI crude oil hit a 2022 low at $71.02 per barrel on Friday (12/9). Gasoline prices at $3.28 per gallon (AAA national average) are now below a year ago, down from $3.79 per gallon just a month ago, and light-years below the high of $5.01 in June.

CME cattle futures set fresh 7-year highs on Friday (12/2), closing at $153.35/cwt. The USDA is forecasting 2023 cattle prices to average $164.00/cwt, up 8.2% from $144.15 for 2022. Beef supplies look to be tight through 2025. The USDA is projecting a cattle liquidation-driven 1.4% increase in beef output for 2022, followed by a huge 7.3% production drop in 2023.

Logistics costs have improved dramatically in 2022 – but, unfortunately, for all the wrong reasons: the high potential for a global recession, Covid lockdowns in China (that are curbing oil and shipping demand), and faltering U.S. retail demand. WTI crude oil futures, which peaked in March at $123.70 per barrel, and averaged $104 for 6 months this year (Mar-Aug), closed at $76.28 on Friday (11/25).

In Friday’s cattle report, the USDA said feedlot inventories totaled 11.71M head on Nov 1, down 2.0% from a year ago. New placements onto feedlots in Oct were down 6.1%. Drought has been the driving factor, burning-up pastures and forcing producers to liquidate feeders at younger ages and lighter weights. Drought-stricken states appear to be tapped out on new placements.

The U.S. survived the mid-term elections with no major problems or fraud accusations. Despite Joe Biden’s low poll ratings and questionable fiscal policy, there was no “red wave” of rejection – nor much of a blue ripple of support. Consider it a victory for “purple” Americans mostly voting the issues of inflation, abortion, crime, and immigration.

The long-awaited rebound in chicken production finally arrived in September. Chicken in cold storage on Oct 1 was up 4.9% from Sept 1 and 18.5% above a year ago. The broiler hatchery flock is above year ago levels. Chicks placed for grow out are running 4.3% above a year ago since Aug 1. The USDA is forecasting Q4 chicken output to be up 3.2% from a year ago.

Natural gas prices are a lot less scary than just a few months ago. The hot summer that drove high energy usage for air-conditioning has given way to a mild fall. Natural gas output is up, and storage facilities are now just 5.5% below the 5-year average, compared to -18% in April and -13% in August. As a result, natural gas futures have plunged by 41.3%, from highs of $9.68 per million BTUs in late August, to $5.68 on Friday (10/28).

In Friday’s cattle report, the USDA said feedlot inventories totaled 11.55M head on Oct 1, down 0.9% from a year ago. New placements onto feedlots in Sept were down 3.8%. Drought continues to be the driving factor, forcing producers to liquidate feeders at younger ages & lighter weights, while also unloading breeding inventory (heifers). In the lowest, under 600-lb category, Sept placements were 10,000 head above a year ago.

Possibly the only thing standing between the U.S. economy and a serious recession is employment levels. Employers added 236,000 net new jobs in Sept – a great number given how hard it is to find new workers. It’s hard to be in a full-blown recession with a 3.5% unemployment rate. However, inflation is still raging, with the CPI at 8.2% above a year ago in Sept.

If you are looking for an energy villain, OPEC is front and center. The Saudi’s and the United Arab Emirates have stonewalled President Biden’s requests to pump more oil. Instead, with WTI crude oil prices dropping to lows of $76.71 per barrel in late Sept (from highs of $122 in June), OPEC announced that it would cut production by 2M barrels per day, in an effort to put a floor under crude oil prices - and possibly even to help the Russians fund their war.