Author: Josh Maples

Two big USDA reports in the last week have boosted livestock prospects at the expense of corn prices.  The annual Acreage report included larger-than-expected corn acres which put downward pressure on corn prices. The report listed corn acres at 91.5 million acres which was 1.4 million acres higher than the March Prospective Plantings report projected. After corn prices surpassed $6 for the 2022/23 marketing year, prices fell below $5 for the current marketing year, and are projected to be closer to $4 for the 2024/2025 marketing year. 
 
While higher than previously projected, corn acres will be slightly lower than 2023 totals. However, good growing conditions are supporting higher yield expectations when compared to 2023. The latest WASDE report included a yield estimate of 181 bushels per acre which would be higher than the 177.3 from a year ago. Stronger yields could lead to corn production for 2024 not being far off from the 2023 total. 
 
Also released last week was USDA’s Quarterly Grain Stocks Report which includes estimates of corn stocks held on farms and in elevators. Total corn stocks on June 1^st were estimated to be 5 billion bushels, up 22 percent from 2023 and the highest June 1 total since 2020. Most of these stocks are still being held on farms as farmers await better pricing opportunities. But, the old common problem arises of holding stocks while supplies grow and prices continue to fall.  On farm corn stocks were just over 3 billion bushels, which is roughly 800 million more than last year and is the largest June 1 total since 1988. 
 
Overall, the news is positive for livestock producers. The simple takeaway is that corn production and stocks are expected to be plentiful, and corn prices are back to lower levels after surging a few years ago. This should continue to bring relief to livestock feed costs and reduce the cost of gain for cattle.  This year’s corn crop is not in the bin yet, so production risks remain that could influence price. Falling corn prices should continue to push calf prices further into record territory.  Returns to hog and poultry production will get a much needed boost from lower feed costs.

Maples, Josh, and David Anderson. “Falling Corn Prices, Higher Calf Prices.” Southern Ag Today 4(28.2). July 9, 2024. Permalink

Feeder cattle prices are at or above record levels across all categories. Today’s chart shows average monthly prices for four steer weight categories in Oklahoma City. Average prices during February 2024 were up approximately 35 percent above year-ago levels and were roughly 60 percent above February 2022 levels. The current prices have met or exceeded the price records previously set during the Fall of 2014.

Cattle supplies have tightened in recent years as cow-culling increased and producers have held back fewer heifers as replacements. Drought conditions, higher input costs, and tight profit margins have been key factors for the decline in inventory. The estimated number of calves produced in 2023 was 33.6 million head which was similar to the 2014 level and down by more than 3 million head since 2018. The number of calves produced in 2024 will very likely be lower again because we are starting the year with fewer beef cows expected to calve. Higher prices are a response to these tighter supplies and should eventually incentivize expansion as producers’ financial situations improve. 

The majority of cattle producers in the U.S. sell their calves in the fall months and the current expectations are for prices to remain strong through 2024. CME feeder cattle futures contracts for the fall months are trading near $2.70 per pound. For reference, the CME feeder cattle contracts have never settled above $2.55. The strong expectations for cattle are leading to attractive risk management opportunities for producers. Whether it is using futures, options, or USDA Livestock Risk Protection (LRP), now is a great time to analyze price risk management tools. 

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Maples, Josh. “Record Feeder Cattle Prices.” Southern Ag Today 4(11.2). March 12, 2024. Permalink

December 1st hay stocks and 2023 production were included in the annual Crop Production Summary released recently by USDA. This report gives the best estimates of the amount of hay available for the winter at the state level.

For this article I’ve focused on states in the Southeastern region excluding Oklahoma and Texas. The 11 states included are AL, AR, FL, GA, KY, LA, MS, NC, SC, TN, and VA. These states represented 18 percent of total U.S. hay production during 2023. I’ve excluded OK and TX only to prevent their large totals from overshadowing the dynamics in the rest of the southeastern region. Hay production in OK and TX is up a combined 42.5 percent with OK hay stocks almost double 2022 levels when the states were suffering from severe drought. 

Despite 2023 production increasing by 4 percent over 2022 in this 11-state region, the estimated December 1 hay stocks dropped 1.1 percent and were at the lowest level since 1988. 2023 is only the 3rd time since 1986 that hay stocks decreased in a year when production increased for this region which would indicate that more hay was used or transported to another region sooner than usual. For comparison, total U.S. hay production increased by 6.3 percent and December 1st hay stocks were 6.9 percent higher than in 2022.

There were noteworthy state-level differences within the region as shown in the maps below. While some states experienced increases, AL, LA, and MS all saw decreases in production in 2023 and also saw significant decreases in December 1 hay stocks. This is likely no surprise as these states were impacted severely by the drought conditions that developed and persisted through the second half of 2023. Producers in these states had generally lower production and had to start feeding hay sooner when pasture conditions deteriorated.   

Lower hay stocks in some states have implications for heifer retention and cow culling decisions. Producers already facing high input costs are less likely to carry cows or heifers through the winter when hay supplies are low. It will be interesting to see the differences in inventory across states when the annual January 1 Cattle Inventory Report is released on January 31st.

Maples, Josh. “Lower Hay Stocks in Some of the Southeast for Winter.” Southern Ag Today 4(4.2). January 23, 2024. Permalink

The latest Cattle on Feed Report raised some eyebrows, showing a slight (0.6 percent) increase in feedlot inventory from last year. Placements of cattle on feed were up about 6 percent driven by higher 700-900 pound placements. In the current setting of tighter supplies and smaller calf crops, many might be rightfully surprised to see an increase in cattle inventory numbers. However, there is plenty to unpack in this report that has both short-term and long-term implications for cattle markets. 

My first big takeaway is the strong number of heifers on feed. The quarterly breakdown of steers vs. heifers on feed was released with this report and showed that 40 percent of feedlot inventories were heifers. This is the highest percentage in over 20 years and indicates that producers continue to send many heifers to feed instead of retaining for reproduction. There are two sides to this: (1) heifers are helping to boost inventories now which could be viewed somewhat negatively for prices in the short term but also (2) fewer heifers retained means a smaller calf crop next year which can be viewed as supporting high price levels in the longer term. To me, this report shut down any ideas that herd expansion is happening or will happen in 2023, that discussion will shift toward whether expansion occurs in 2024. 

The increase in placements is interesting because it likely reflects producers selling now to take advantage of strong markets but also some producers being forced to sell feeder cattle a little earlier than expected due to expanding drought in many areas. Looking ahead at price expectations, it is worth noting that the current strong market prices have not really reflected herd rebuilding efforts yet. The rebuilding phase will include holding back more heifers which will mean fewer heifers sold as feeder cattle. Combined with smaller calf crops as a whole, this will be the point when feeder cattle supplies get really tight and prices have the strongest supply-side support. 

As we approach the fall months, folks in the cattle industry might expect to see some weakness in cattle prices as many producers sell their spring born calves. However, 2023 could shape up to be one of the abnormal years when the broader upswing in prices outweighs the typical seasonal pressure. 

The chart above uses monthly average prices for 500-600 pound medium and large #1 steers sold at auctions in Texas. The lines for 2014, 2015, and 2023 use the left axis and are dollars per hundredweight. The solid black line with markers represents the 10-year average monthly index values from 2013-2022 and uses the right axis. Without getting too deep into the details, this index calculation is one way to visualize seasonal patterns. An index value of 96 (October) means that during 2013-2022, prices were 4 percent lower than the annual average. Similarly, an index value of 103 (March) means prices were 3 percent higher than the annual average.  

As the chart shows, normal seasonal patterns would suggest falling prices for the next few months for 5 weight cattle. But 2023 has been anything but normal. History shows us years when prices seem to mostly ignore within-year seasonal patterns because of broader uptrends or downtrends in prices. 2014 is an example year when prices rose throughout the year and overshadowed seasonal patterns. 2015 is an example of a market downtrend that concealed seasonal patterns, 

So far in 2023, this year has been more similar to 2014 with prices rising steadily throughout the year. Instead of the typical dip from March-May, prices rose in 2014 and 2023. This could well be the story this fall too as overall strength in cattle markets (and tighter supplies) outweighs the within-year seasonal patterns we might expect. 

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Maples, Josh. “Counter Seasonal Runs in Cattle Prices.” Southern Ag Today 3(32.2). August 8, 2023. Permalink