Author: Josh Maples

The Russian invasion of Ukraine has led to far-reaching impacts on commodity markets across the globe. In particular, oil and grain prices have surged which contributes to increases in the cost of production throughout livestock supply chains. Feeder cattle futures prices have dropped roughly $10 per CWT since mid-February depending on the contract (though prices were higher in Monday trading).

 Near term corn prices have jumped by around a dollar per bushel in the past few weeks. As shown in the chart above, the May 2022 CME corn futures contract closed last week at $7.50 per bushel. Higher corn prices generally put pressure on feeder cattle prices since feeder cattle and corn are two primary inputs into producing fed cattle. Poultry and hog producers of course also feel the brunt of higher feed prices. Corn futures contracts expiring further in the future have also increased though not by the same magnitude. For example, the December 2022 CME corn futures contract closed last week at $6.30 which is up about $0.40 above mid-February.

 Cattle prices are caught in the broader uncertainty and market volatility. Many input prices were already high compared to recent years. The severity and length of time that higher feed costs will persist are key questions without good answers. Feed costs (among other inputs) will be higher in the near term. Planting season is just around the corner in the U.S. and the amount of corn planted will be important for supply and price forecasts. 

Maples, Josh. “Higher Feed Costs for Livestock Producers“. Southern Ag Today 2(11.2). March 8, 2022. Permalink

Drought conditions have troubled livestock producers in many parts of the U.S. over the past few years. According to the latest report, approximately 50 percent of cattle inventory is in an area currently in some level of drought conditions. Most of the severe drought areas are in the Great Plains and Western U.S. The Western and Great Plains regions ended 2021 with about 60 percent of pasture in poor or very poor condition. Drought has contributed to beef cow herd liquidation in severe regions. 

Drought areas in the Southeast are not widespread, with many areas receiving much precipitation in recent weeks. However, some drought areas have developed in the Southeast in recent months across TX, LA, AR, and MS. Cool season forages such as winter ryegrass or winter wheat are the primary forages grown during this time of the year and will need moisture through the winter. The latest drought monitor shows approximately 65 percent of U.S. winter wheat production is in an area experiencing drought. While most of this production is in the Plains region, some is in the Southeast. Cattle producers with lower winter forage production due to lack of moisture may need to increase supplementation for cattle over winter – with higher feed and hay costs. 

Maples, Josh. “Cattle Areas in Drought“. Southern Ag Today 2(3.2). January 11, 2022. Permalink

The November estimates of retail meat prices were released last week by the USDA Economic Research Service (ERS). This dataset sheds light on average retail meat prices using data from the Bureau of Labor Statistics (BLS). Retail prices for beef, poultry, and pork were all up sharply from year ago levels. The all-fresh beef retail price was reported at $7.52 per pound during November. This was a few cents below the October level but still about 21 percent above the same month a year ago. Pork and chicken retail prices were also higher as compared to a year ago.  Retail pork prices were up about 18 percent and chicken prices were up about 10 percent compared to November 2020.

The monthly BLS Consumer Price Index summary was also released last week and showed the all-items price index has increased 6.8 percent over the past 12 months. This is the largest 12 month increase since 1982. Higher energy prices were a contributor to the CPI increase. The energy price index was up 33 percent over the past 12 months. The food price index was up 6.1 percent over the past 12 months with meat price increases being a key factor. 

Maples, Josh. “Meat Prices and CPI.” Southern Ag Today 1(51.2). December 14, 2021. Permalink

Beef cow slaughter has been higher than year-ago levels for most weeks in 2021. National beef cow slaughter is up about 10 percent (or about 6,000 head weekly average) since July over the same period of 2020. In the southeast reporting region which includes AL, FL, GA, KY, MS, NC, SC & TN, beef cow slaughter has been about 25 percent higher since July 2021 than it was during the same period of 2020. That is equivalent to an additional 2,000 head each week on average. This region accounts for about 15 percent of national beef cow slaughter. There has been some additional cow processing capacity brought online in the southeast in 2021 which helps explain the weekly increase in slaughter. But where are the cows coming from? Are producers in the southeast culling cows deeper than previously expected? Weekly auction receipts shed some light on these questions.

Combined weekly auction receipts for slaughter cattle (reported as both cows and bulls) from GA, KY, and MS are up 3 percent since July compared 2020. That 3 percent increase equals an additional 128 head weekly average. The data is messy, and I don’t have the data for the other 5 states in the region, but the receipts don’t suggest enough of an increase in the number of cows being culled in the southeast to support the big increase in beef cow slaughter in the region. It seems likely that a good portion of the increase in slaughter are cows coming from other regions. Backhauling cows is likely a contributor when calves or feeder cattle are trucked from the southeast to other regions and cull cows come back. The January Cattle Inventory report will tell a more complete story of the changes in cows in each state. 

Maples, Josh. “Huge Cow Culling in Southeast? Not So Fast, My Friend!” Southern Ag Today 1(49.2). November 30, 2021. Permalink