Author: David Anderson

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

It’s time for another USDA Cattle on Feed Report to be released on Friday, March 25^th.  The most interesting number in the report is going to be placements, e.g. the number of cattle placed on feed, in a feedlot with 1,000 head or more.  Market analysts expect placements to be well above a year ago, almost 10 percent more in some estimates.  Both USDA’s feeder cattle receipts data and the CME feeder cattle index data indicate more feeder cattle sales this February than last.  While feeder cattle imports from Mexico were down about 23,000 head during the month, imports from Canada were up about 29,000 head.  It’s also worth noting that placements in February, 2021 were relatively small.

Certainly, expanding drought is likely leading to increased placements.  Some profitable recent closeouts also help boost placements.  The war driven boost in corn and wheat prices occurred after the period for this report so placements were likely not driven by the events in Ukraine. 

Marketings, as related to fed cattle slaughter, were quite good during February.  They are expected to be up about 4.5 percent over last year.  Combining marketings and placements indicate that the number of cattle on feed will be a bit more than 1 percent larger than last year.  That will be close to the record large number of cattle on feed that was set in February. 

Anderson, David. “Another Big Placement Month“. Southern Ag Today 2(13.2). March 22, 2022. Permalink

War has contributed to cattle market uncertainty and sharply higher feed costs, record-high cattle on feed, and falling cutout values have hit heavy feeder prices hard.  But, cull cow prices have continued to skyrocket since the beginning of the year, shooting past $75 per cwt in the Southern Plains.  A year ago, 85-90% lean cull cows averaged about $46 per cwt.

Cow prices are increasing in spite of large cow slaughter.  Cow slaughter during the first two weeks of February totaled 145,000 head, or more, per week.  That is the largest weekly slaughter since December 2012.  Beef cow slaughter is extremely large, rivaling peak Fall slaughter levels.  This large beef cow slaughter is coinciding with seasonally large dairy cow slaughter, which typically peaks early in the year. 

High cow beef prices are providing some insight into beef demand.  Both the cow beef cutout and the wholesale 90 percent lean beef for ground beef are well above a year ago, at $229 and $284 per cwt, respectively.  But, wholesale middle meat prices have dropped in recent weeks with both wholesale ribeye and strip loin prices lower than last year.  Consumers may be shifting purchases to more ground beef and fewer steaks in response to high retail prices.

Increasing milk prices should slow dairy culling in the coming weeks.  Beef cow culling is going to be greatly influenced by drought and costs.  The rate of culling over the last year should have already moved older, less productive cows.  Reduced dairy culling should pull down total cow slaughter and support prices in the coming weeks.

Anderson, David. “Cull Cow Prices Skyrocket“. Southern Ag Today 2(12.2). March 15, 2022. Permalink

USDA’s February Cattle on Feed (COF) report will be released on Friday, February 25^th.  It’s expected to show a record number of cattle on feed in feedlots with 1,000 or more head.  The combination of fewer marketings than the year before and large placements should leave COF at 100.8 percent of the 12.106 million head on feed last February.  

Feedlot marketings should be about 2.7 percent below last year.  Given that there was one more slaughter day in January 2022 than 2021 that is a relatively low rate of daily average marketings.  Placements are expected to be about 98.9 percent of last year.  That would be a relatively large number of cattle placed.  Large placements could be driven by continued movement from drought-affected winter grazing and large sales from the Northern Plains.  Rising fed cattle prices likely encouraged placements also.  About 21,000 fewer feeder cattle were imported from Mexico in January 2022 than the year before, but about 9,000 more were imported from Canada. 

Large placements would indicate another month of pulling feeder cattle supplies forward.  While the result is more cattle on feed today, it also means fewer feeder cattle available later in the year.  The expected tighter supplies of calves and feeders are fueling optimism for much higher calf prices later this year.

Anderson, David. “Record High Cattle on Feed Expected“. Southern Ag Today 2(9.2). February 22, 2022. Permalink