Author: Kenny Burdine

As we move into fall, we have a pretty good feel for the size of the 2022 corn crop. Acreage is down significantly from last year and yield estimates were reduced recently to 172.5 per acre. Barring a major shock on the demand side, feed prices are going to be a challenge for cattle operations this winter.

Perhaps the most important thing to remember is that cost of gain and value of gain are correlated. Feedlots prefer to place heavier feeder cattle when feed prices are high, so the price discount on higher weights gets smaller. This narrowing of price slides increases the value of additional pounds when feeder cattle are sold. Opportunities can still exist in high feed price markets depending on cattle price dynamics. Producers may find that opportunities to grow feeders still exist, especially if they can efficiently make use of alternative feeds. Along those same lines, producers need to make sure they distinguish between cost of feed and cost of gain. Cost per ton of feed really does not tell me much unless I know something about that feed’s ability to put weight on cattle. 

Finally, there are also implications for fall grazing. A quick glance at the drought monitor reveals how much variation exists across the country. While grazing costs have increased recently as well, they have not increased as much as purchased feed. So fall pasture is likely the most attractive feed that can utilize to add pounds. The current market also increases incentives to incorporate rotational grazing or strip grazing to increase the utilization of those forages.

Burdine, Kenny. “Livestock Feed Price Implications for Fall“. Southern Ag Today 2(39.2). September 20, 2022. Permalink

After dealing with incredible volatility for much of 2020 and 2021, dairy producers are benefiting from a sharply stronger milk market in 2022. Prices for cheese, butter, and nonfat dry milk are running significantly higher than last year and are fueling farm level milk prices. The US All Milk price set a record in March of 2022, then exceeded that level to set a new record the following month. From March to April, prices rose by $1.20 to a record level of $27.10 per cwt. Prior to March of this year, the record high milk price was set in September of 2014.

US All Milk Price

January 2014 to April 2022, $ per cwt

Like most all commodities, milk prices only tell part of the story this year. Dairy producers are dealing with higher production costs as feed, fuel, fertilizer, and other inputs are also much higher. While feed rations differ across all operations, the assumed ration for the Dairy Margin Coverage (DMC) program has become a common metric to estimate feed costs for dairy operations. DMC feed cost includes assumed quantities of corn, soybean meal, and alfalfa hay for a representative dairy operation. 

From April 2021 to April 2022, the estimated cost of the DMC ration has increased by $2.28 per cwt or 18%. The US All Milk price has increased by more than enough offset that increase over the last year, but considering the increase in feed costs does put the historical price levels in a slightly different perspective. While milk prices are setting record highs, estimated returns above feed costs have reached levels comparable to what was seen at times in 2019 and 2020. And, they are not at the levels that were seen during 2014.

DMC Margin – US All Milk Price Minus DMC Feed Cost

January 2014 to April 2022, $ per cwt

Burdine, Kenny. “Farm Level Milk Prices Set Record in Back-to-Back Months“. Southern Ag Today 2(26.2). June 21, 2022. Permalink

The culling of beef cows was a major reason why the size of the beef herd decreased during 2021 as beef cow slaughter was up by almost 9% from 2020 levels. A frustrating calf market and drought in much of the US led to herd reductions as a lot of cows were sent to market. Year-over-year, the increase amounted to almost 300 thousand cows, which was roughly 1% of the US beef cow herd. 

While calf prices have been higher in the first three months of 2022, a large portion of the US remains in significant drought. Most significantly for the cattle sector, drought moved into the Southern Plains during the fall of 2021 and has seemed to intensify over the last several months. The chart below shows beef cow slaughter for 2022 (blue line), which has been running well ahead of 2021 (dotted line). Year-to-date, beef cow slaughter has been over 16% higher, but it is worth noting the very low slaughter week last year as a result of the February 2021 ice storm. But, even taking that week out of the comparison, harvest levels are still more than 13% higher so far this year.

Beef heifer retention was lower coming into 2022, which suggests continued contraction in beef cow numbers. It is still early in the year, but beef cow slaughter through the first few weeks of March points to another year of heavy culling. The combination of dry weather and strong cull cow prices is likely to keep cows moving and encourage producers to pull the trigger a little sooner on those cows as they approach the end of their productive lives. This is definitely something to watch as we move through the current year.

Burdine, Kenny. “Beef Cow Slaughter Continues to Run High“. Southern Ag Today 2(17.2). April 19, 2022. Permalink