Category: Livestock Marketing

In August 2021, the USDA announced a new market news report that would contain the distribution of weekly US fed cattle prices using price “bins” (LM_CT215). What makes this report unique is the way that price data are reported. Prices are reported in $2 increments, or bins, for negotiated cash, net formula, net forward contract, and negotiated grid nets. Figure 1 shows an example of how these weekly data are reported. The weekly weighted average live fed cattle price is highlighted in Figure 1.  The number of fed cattle selling at each $2 per cwt premium or discount to the average is reported in the grid.  

Figure 1. Snapshot of Data Reported in USDA National Weekly Direct Beef Type Price Distribution (LM_CT215)

The new distributional data allow market participants to understand fed cattle prices in more detail and go beyond minimum, maximum, and average prices for each marketing type. With this new distributional dataset for formula and negotiated fed cattle prices, we^[1] analyzed how weekly prices between these two markets interact with each other. One objective of our study centered around the impacts of negotiated prices on cattle markets. Specifically, as concerns have risen in relation to a possible thin cash market, we wanted to understand whether or not negotiated prices impact formula prices, or if it’s the other way around, as some market participants have suggested. Figure 2 displays a visual representation of the results from our study and shows how prices interact with each other (from August 10, 2021, to May 14, 2024). Current negotiated (orange) and formula (blue) prices for a given week are in the middle. We found that, depending on the market, current prices are impacted by the preceding three weeks of prices (the two columns on the right and left).

Figure 2. Negotiated Cash and Formula Fed Cattle Price Relationship Flow Chart. Data is weekly for the time range, August 10, 2021, to May 14, 2024 (n = 145).

Our study found that the current negotiated cash price for a given week (top middle orange box) is positively impacted by the week prior negotiated cash price (green dotted line), and negatively impacted by the negotiated price 3-weeks prior (solid red line). Current formula prices were found to be positively impacted (green dotted line) by the formula price from the prior week and the prior two weeks of negotiated fed cattle prices. However, formula prices were negatively impacted (solid red line) by formula price from two weeks prior. 

Despite concerns that the negotiated cash market is too thin and does not provide marketing information to the formula market, we find that the negotiated price does influence the formula fed cattle price. We find evidence supporting the conclusion that negotiated cash price information is being transmitted to formula price variability, which is expected because formula prices are designed to be based on the negotiated trade. Our results also indicate that formula prices do not impact on the negotiated price. 

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^[1] Boyer, C.N., E. Park, A. F. Ramsey, and C. Martinez. 2024. “Formula and Cash Negotiated Fed Cattle Price Relationships”. Journal of Agricultural and Resource Economics, forthcoming.

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Martinez, Charley, Christopher Boyer, Eunchun Park, and A. Ford Ramsey. “The Relationship Between Formula and Negotiated Cash Fed Cattle Prices.” Southern Ag Today 4(34.2). August 20, 2024. Permalink

In 2024 a GOAT is what they call the “Greatest Of All Time.” Despite all of the discussions of Olympians who may or may not be the greatest athletes of all time in their sport, it is also important to discuss the actual goat market. Goat production is big business in the Southern United States.

Figure 1 contains 35-50 pound and 51-65 pound selection 1 goats in Tennessee from January 2020 through July 2024. The variability in prices throughout a year is evident in that prices have typically had a $150 to $200 per hundredweight price range in a given year. Most of this is simply due to seasonality of prices, which is driven by basic supply and demand. The bigger storyline is what appears to be a softening of goat prices from the high prices seen in early 2022. 

The question at hand, what is causing the negative trendline in goat prices the past few years? It is difficult to blame lower goat prices on supply, because the January 1 inventory report for 2024 indicates there are 100,000 fewer goats than the same time in 2022. More specifically, all meat and other goats account for 90,000 head of that decline with the meat and other goat breeding herd down 68,600 head from 2022. This leaves the other side of the coin, which would be the demand side for goats and goat meat. There does not appear to be people leaving the domestic market that previously demanded goat meat. One logical explanation could be the softening economy and higher price of goat meat has rationed the product. It appears goat prices may continue to decline in the near term.

Figure 1. Tennessee Goat Prices from January 2020 through July 2024.

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Griffith, Andrew P. “Finding the GOAT.” Southern Ag Today 4(33.2). August 13, 2024. Permalink

Dairy cow slaughter rebounded sharply in the two weeks after the holiday shortened fourth of July week.  It’s pretty normal for dairy cow slaughter to climb seasonally after early July but, the magnitude of this weekly increase is larger than usual.  Even with the rebound in culling, weekly slaughter remained smaller than last year and the average of the last 5 years.  The trend of smaller dairy cow culling is likely to continue the rest of the year, even though culling may increase seasonally.  

Over the last 8 weeks dairy cow culling is 18 percent smaller compared to the same time period last year.  Dairy cow slaughter is reported by region.  Region 4 (Southeastern states), region 6 (Texas, Arkansas, and Louisiana), and region 3 (Virginia and Pennsylvania) include Southern states.  Dairy cow slaughter in regions 3 and 4 are down 10 percent and 8 percent, respectively.  Slaughter in region 6 is down 32 percent.  Regional differences in slaughter rates continue to indicate shifts in regional milk production with faster than average culling rates in the South but slower culling in the Southern Plains.  On an interesting note, region 8, which includes Colorado and the Dakotas, has reported larger dairy cow slaughter this year than last year and is the only region to do so.  Dairy cow culling is likely to remain relatively low in coming months due to fewer dairy cows in total, relatively few replacement heifers, and rising milk prices.

The overall decline in dairy cow slaughter is further supporting cull cow prices across the South and the country.  Dairy cow slaughter has made up, on average, about 48.6 percent of all cow slaughter over the last decade.  This year dairy cow slaughter represents 48.3 percent of all cow slaughter.  Reduced dairy cow culling coinciding with reduced beef cow slaughter is further cutting supplies of lean beef.  Wholesale boneless 90 percent lean beef hit a new high of $3.76 per pound last week.  The cow-beef cutout is in record territory at over $290 per cwt.  Lean slaughter cows at auction continue to hover around $125 per cwt.  The lack of dairy replacements and need for replacements by some has bred dairy cow and heifer prices up from $300 to $600 per head in Kentucky dairy auctions.  

Overall, reduced dairy cow culling is supporting cull cow prices.  Reduced total cow culling is putting additional strain on cow packing plants across the region.   

Anderson, David. “Dairy Cow Slaughter Posts Strong Rebound.” Southern Ag Today 4(32.2). August 6, 2024. Permalink

Drought gripped the Southeast U.S. starting in June and has continued into July. More than 60 percent of the Southeast (AL, FL, GA, NC, SC, and VA) is experiencing drought. These drought conditions have hurt pasture and rangeland conditions in the Southeast. According to the USDA in mid-July, about 30 percent of the pasture in the Southeast (AL, AR, FL, GA, KY, LA, MS, NC, SC, TN, VA, WV) are in poor or very poor condition. Some drought conditions persist in other areas of the South, as well, including approximately half of Texas, 60 percent of Oklahoma, and 70 percent of Tennessee.

Figure 1: Drought Conditions in the South

Should these drought conditions persist, producers will have several decisions to make related to feeding alternatives, forage management, marketing, and other areas. These decisions have implications for a host of different producer outcomes. Economics calls on producers to assess each decision along the following lines: How do revenues and costs change with each decision? This is the essence of a partial budget. A partial budget assesses the change in revenue and the change in costs associated with a change in practice. If changing practices increases net returns, you should change your practice. If not, continue with your baseline practice.Drought creates some uncertainty to the price outlook for this fall. If drought incentivizes producers to bring more calves to market compared to normal, while still remaining high compared to recent history, calf prices may see a more pronounced seasonal dip this fall. 

Drought creates some uncertainty to the price outlook for this fall. If drought incentivizes producers to bring more calves to market compared to normal, while still remaining high compared to recent history, calf prices may see a more pronounced seasonal dip this fall. Timing may play a role, too. If calves are sold early, the fall low may be more spread out over time and not as deep. Lastly, if the weather improves, any expectations of more cattle this fall may evaporate pushing prices higher than expected. The next several weeks will be important in assessing where cattle markets will be in the months ahead.

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Secor, William. “Cattle and Drought in the South and Southeast.” Southern Ag Today 4(31.2). July 30, 2024. Permalink

USDA’s July Cattle on Feed report was released on Friday July 19^th. These monthly reports estimate inventory in US feedlots with one-time capacity exceeding 1,000 head, which represent more than 80% of total on-feed inventory in the United States. The July report is also a quarterly report that includes data on the steer-heifer mix in feedlots. This brief article will walk through last week’s report and some of the implications of it.

Total on-feed inventory declined during the month of June with July 1 inventory estimated at just over 11.2 million head. This trend is normal as on-feed numbers tend to decline seasonally from winter to late summer. Compared to 2023, July 2024 inventory was actually about 0.5% higher. On the surface this seems odd given the recent declines in the size of calf crops, but I maintain that cheap feed and higher slaughter weights are largely the reason for this as cattle are being fed longer.

Feedlot placements have been the most interesting number to watch in recent months. For the month of June, placements were down almost 7% from last year. This contrasts with placements being 4% higher year-over-year for the month of May. These last two months illustrate why it is sometimes hard to look at things purely on a monthly basis. If I instead calculate feedlot placements for the first 6 months of 2024, as compared to the first 6 months of 2023, total placements have been down by 3.2%. This likely tells the feeder cattle supply story a bit better.

Since USDA will not be publishing a July Cattle Inventory report this year, the July steer-heifer mix on feed is especially important as it provides some perspective on heifer retention. Heifers accounted for 39.6% of on-feed inventory in July, which was actually higher than the previous estimate from April. If retention were occurring, one would expect the heifer percentage to be in the low-mid 30% range, so this continues to suggest that expansion is not on the near horizon.

Burdine, Kenny. “Growing On-feed Inventory, Lower Placements, and No Sign of Heifer Retention.” Southern Ag Today 4(30.2). July 23, 2024. Permalink