Author: Josh Maples

The January 2025 feeder cattle futures contract dropped roughly $25 per CWT from mid-July to mid-August. But, since early September, futures contract prices have rebounded about $15 per CWT. Points on the solid maroon line in the chart are the end of day futures contract prices from last Friday for each feeder cattle futures contract month. Points on the dotted black line are end of day prices back on September 6^th, after the big decline.  

The chart nicely illustrates seasonality within the futures market. Auction prices for 750-pound feeder cattle are typically lowest in the spring months when those calves are yearlings.  Futures prices reflect expectations of seasonal patterns too, but there are a few steps to thinking through the impact. 
 
First, it’s important to remember that feeder cattle futures prices are the “market’s” expectation of what the CME Feeder Cattle Index will be at the end of the contract month. The “market” is made of buyers and sellers trading the futures contract. The feeder cattle index is calculated from auction prices for 700-899 pound steers collected by USDA-AMS for a 12-state region in the middle of the U.S. (there are no states east of the Mississippi River included in the index). It is a 7-day rolling weighted average, so today’s index value is a weighted average of the auction prices over the past week. Most auctions only operate one day per week so the 7-day average catches sales during a week’s period.
 
How does seasonality fit into this? If prices are typically expected to be lower during certain months (i.e. seasonality), then the futures contract prices for those months will likely be lower because traders are “baking-in” the seasonality expectations. The chart above is a good example. Since these prices reflect 700-899 pound feeder steers, the market (futures traders) is expecting auction prices (the CME index) to be lower during the spring months before rising seasonally as summer approaches.

This exercise illustrates the importance of understanding how the value of your cattle correlates to futures market prices for risk management or for forecasting prices. Your cattle may not be 800-pound steers sold in that 12-state region. But if you know your cattle are usually $10 above or $10 below the futures market at sales time, then then you can still use the futures market’s expectations to forecast the expected value of your cattle and to participate in price risk management tools.

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Maples, Josh. “Feeder Cattle Futures Prices.” Southern Ag Today 4(46.2). November 12, 2024. Permalink

The latest USDA Cattle on Feed report was released Friday and showed placements of cattle into feedlots during August were 1.4 percent lower than during August 2023. Marketings of fed cattle out of feedlots were down about 3.5 percent from a year ago, partially due to one less business day in August 2024 than in August 2023. Both of these numbers were within pre-report expectations and will likely not be big market movers. 

Most of the decline in placements from a year ago occurred in placements of cattle weighing less than 800 pounds. Placements of cattle in this weight range were 3.4 percent lower while placements of cattle weighing more than 800 pounds were 1.4 percent higher. Placements in both Kansas and Nebraska were down about 3 percent while placements in Texas were down nearly 6 percent as compared to a year ago. Placements in Colorado were the exception and were up nearly 30 percent. 

Despite the lower placements, the total number of cattle in feedlots with more than 1,000 head capacity on September 1st was up 0.6 percent compared to a year ago. This continues the trend of cattle staying in feedlots longer. Total placements of cattle into feedlots during 2024 is down about 2 percent but longer feeding periods have reduced turnover and helped to keep inventory levels from fully reflecting the declining calf crop totals. 

Longer feeding periods are leading to higher cattle weights. The average dressed weight for federally inspected steers during August 2024 was 930 pounds. Assuming a dressing percentage of 62.5 percent, this suggests an average live weight of 1,488 pounds. This is the highest August steer dressed weight average on record, easily surpassing the 911-pound average during August 2020. Heifer dressed weights also hit an August record at 840 pounds on average. The higher dressed weights are offsetting much of the impact of lower cattle numbers on beef production. Total beef production in 2024 is now expected to be very close to beef production in 2023 despite fewer head processed.

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Maples, Josh. “Cattle on Feed and Record High August Fed Cattle Weights.” Southern Ag Today 4(39.2). September 24, 2024. Permalink

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