Author: David Anderson

On livestock market Tuesdays, the authors normally highlight events in livestock markets.  Today we are looking beyond the farmgate to examine wholesale beef prices (we’ll look at pork, poultry, and dairy products in future SATs).  The boxed beef cutout is the value of the primal cuts making up a carcass.  The cutout is below last year across all USDA quality grades.  Digging a little deeper into individual cut prices paints a pretty interesting picture of beef prices this year and provides some price evidence of changing consumers.

We can think of the middle meats of a beef carcass as the expensive, high value cuts – the steaks from the loin and the rib.  The end meats are the chuck and round and are, generally, lower valued.  With consumers facing higher costs and budget pressures we might expect them to buy fewer steaks and more ground beef.  The wholesale price data tends to support that idea.

Wholesale ribeye prices have been below last year’s prices since the end of January.  Last week ribeyes averaged $9.40 per pound compared to $14.51 per pound the same week last year.  Ribeyes, traditionally, tend to peak late in the year as a holiday item and have been increasing over the last several weeks.  It’s likely that they will continue to trend higher as an alternative to high priced turkeys.  

Strip steaks normally peak in value during early grilling season.  That peak was a little later this year at $8.81 per pound back in July.  They have since dropped sharply to $6.48 last week, below last year’s $7.67 per pound in the same week.  Tenderloins last week were 26 percent lower than this point a year ago.  

In contrast, 90 and 50 percent lean boneless beef prices have remained above a year ago until just recently.  Even in the face of large cow slaughter, lean beef prices have remained relatively high. 

Wholesale beef price data certainly suggest consumers, through retailers, have likely shifted around a bit, buying fewer steaks and more ground beef.  It’s also likely that the overall demand for beef has remained quite good.  We continue to produce large amounts of beef and retail prices have not begun to decline.  All in all, this is not bad news for calf and cattle prices this fall.

Anderson, David. “Wholesale Beef Prices“. Southern Ag Today 2(38.2). September 13, 2022. Permalink

There has been a lot written about beef cow culling this year due to drought and high costs and most of that has focused nationally.  This article looks at cow slaughter in the South.  Federally inspected beef and dairy cow slaughter is reported regionally.  The two regions that cover most of the South are regions 4 and 6.  Region 4 is comprised of 8 states including Alabama, Florida, Georgia, Kentucky, Mississippi, North and South Carolina, and Tennessee.  Region 6 includes Louisiana, Arkansas, Texas, Oklahoma, and New Mexico (a little further afield than the traditional South).  These two regions only leave out Virginia, which is in region 3.  

Region 6, the Southern region most affected by drought, has culled 668,000 beef cows this year, up 31 percent from last year (157,000 head).  Beef cow slaughter in region 4 is up 55,000 head, or 18 percent, over 2021.  In 2022, these states contained 44 percent of the nation’s beef cows.  Dairy cow slaughter in both regions is slightly below last year.  

A comparison of cow culling this year to that of 2011, during the last major drought in Texas and other parts of region 6, indicates that 8,000 more beef cows have been culled this year than in 2011.  About 24,000 more beef cows have been culled in region 4 this year than in 2011.  Both regions began 2022 with fewer cows than they had at the beginning of 2011. 

Significant rainfall in parts of Texas over the last couple of weeks may curtail culling in the near future.  Watch beef cow culling over the next 6 weeks heading into, seasonally, the largest cow culling weeks of the year nationally in October and November.

Anderson, David. “Cow Slaughter in the South“. Southern Ag Today 2(37.2). September 6, 2022. Permalink

USDA released two cattle reports on Friday July 22nd – the Cattle on Feed and Cattle Inventory reports. Taken together, these reports paint a picture of a smaller cowherd and some future opportunities as supplies continue to tighten.

Cattle on Feed

Placements, marketings, and total cattle on feed were reported at 97.6, 102.0, and 100.4 percent of a year ago, respectively.  For the fourth month in a row, placements were below a year ago.  For the year, placements are ahead of last year, but the increase was all in February.  

Placements were higher than a year ago by 15,000 and 10,000 head, in the two lightest weight categories, under 600 pounds and 600-699 pounds.  All of the increase in light weight placements was reported in Texas. Based on anecdotal evidence of large runs of cattle after the 4^th of July, placements in July may be larger than last year, at least in light-weight cattle.

In only two years, 2019 and 2001 (4.470 and 4.446 million head), were more heifers reported on feed on July 1 than this year (4.445 million head).  The quarterly number of heifers on feed dovetails with the inventory report of fewer beef cows and replacement heifers held back.

Cattle Inventory

Beef cow numbers were reported 2.4 percent below July 1, 2021 in the mid-year Cattle inventory report.  The most interesting number in the report, though, was the number of heifers held for beef cow replacement.  Only 4.15 million heifers were held back which was the fewest since the data series began in 1973.  The 4.15 million heifers equals 13.7 percent of the cowherd.  As a percent of the cowherd, only the years of herd contraction 2001-2003, the 2011 drought year, and herd contraction in 2019 were smaller than this year.  It’s worth noting that over the last 50 years, heifers held back as a percent of the cowherd has been declining.  In general, we have fewer beef cows than in the early to mid-1970s requiring fewer replacements, but it also suggests more efficient beef cattle production.  

Anderson, David. “Cattle and COF Reports“. Southern Ag Today 2(31.2). July 26, 2022. Permalink

Beef cow culling has been an important story this year and SAT has discussed it a couple of times, but last week beef cow slaughter topped 80 thousand head for the first time since 2012, making it worth looking at again.  So far in 2022, beef cow slaughter is 15 percent higher than the same period in 2021. This is equal to approximately 200 thousand more head of beef cows processed this year. Beef cow slaughter averaged about 65 thousand head per week in 2021, but is averaging about 75 thousand head per week in 2022.

 
Drought, higher feed and other input costs, and stronger cull cow prices continue to be the likely reasons behind the increase. Looking at the regional slaughter data, it appears that beef cow slaughter has increased more in areas with drought. Beef cow slaughter in Region 6 (AR, LA, NM, OK, and TX) is up 30 percent over 2021 and region 7 (IA, KS, MO, & NE) is up 29 percent. However, beef slaughter is also about 20 percent higher in Region 4 (AL, FL, GA, KY, MS, NC, SC & TN) where drought has not been an issue.  Beef cow slaughter continues to indicate contraction of the U.S. beef cow herd in 2022. 

Lightweight calf prices have dropped dramatically in recent weeks, responding to high feed costs and lower fed cattle futures prices.  In the Southern Plains, calf prices have fallen by more than the normal early summer seasonal decline and may reflect some more drought forced sales.  Heavy weight steers in the South have declined more than those in the Southern Plains, likely impacted by increased hauling costs as diesel fuel prices hit record highs.    

Anderson, David. “Large Cow Culling, Calf Prices Diving“. Southern Ag Today 2(24.2). June 7, 2022. Permalink

USDA released the May Cattle on Feed report on Friday, May 20^th and it showed continued large numbers of cattle on feed.  Placements, marketings, and cattle on feed were 99.1, 97.8, and 101.7 percent of a year ago, respectively.  Placements and the number on feed were larger than the average pre-report estimates and so the report was regarded as being a negative one for the market.  

The report was important in terms of calf price expectations for later this year.  Placements were 99.1 percent of a year ago, 1.809 million head.  For the January-April period, 7.651 million feeders have been placed.  That is the second largest number, behind only 2019, in the last 20 years.  Maybe more important, it is the largest number of placements as a percent of January 1 cattle outside of feedlots.  Placements this year have totaled 30 percent of the January 1 feeder cattle supplies.  Again, more evidence of pulling feeders ahead and it implies tighter supplies of feeder cattle as the year goes on.  Those tighter supplies should translate into higher calf and feeder prices.

The next quarterly cattle on feed report will have some more evidence of heifers on feed.  Given the rate of placements of available feeder cattle, heifers as a percent of cattle on feed should remain large, meaning continued herd contraction from the replacement side, as well as the cow side.

Anderson, David. “Large Placements Bring Tighter Feeder Supplies“. Southern Ag Today 2(22.2). May 24, 2022. Permalink