Category: Livestock Marketing

Total beef production can be defined as the number of animals slaughtered times the average dressed weight. I’ll briefly discuss the steer dressed weight in this article, emphasizing its recent surprising behavior. Dressed weight corresponds to the weight of the carcass minus feet, head, hide, and organs (ERS/USDA). Figure 1 shows the atypical seasonal pattern so far in 2024 for the U.S. federally inspected weekly average steer dressed weight. The blue line exhibits the 2024 counter-season pattern when contrasted with 2023 (dotted line) and the 2018-2022 average (red line).

Following a record high for the first week of January (937 lb./head), the dressed weight experienced a gradual decline until the fifth week of 2024, when it reached 909 lb./head. Winter weather helps explain this fall at the beginning of the year. However, instead of continuing to decrease, the dressed weight unexpectedly surged, reaching record highs for weeks 9 to 16. During this period (weeks 9 to 16), the steer’s average dressed weight was 921 lb./head, tallying 25 lb./head heavier than in 2023 and 32 lb./head more than the previous five years’ average.

One of the key factors contributing to the recent increase in dressed weight is the surge in days on feed. The number of cattle on feed (COF) for over 120 days significantly increased, exceeding 4.9 million head in April, up by about half a million from last year. Meanwhile, the COF, for over 90 days, plateaued at around 6.6 million heads since February. As the cost of gain has dropped, producers tend to increase weights. But, keeping the yard full and packers slowing harvest schedules may be more important factors in dressed weights.  One by-product of heavier weights and more days on feed is the percent of carcasses grading Prime.  In fact, the percent of Prime carcasses jumped from 9.9 percent in the first week to 11.4 percent in the last week of April 2024 (Figure 2). More Yield Grade 4’s and 5’s is another by-product, but that is another subject.   

In the short run, the dressed weight shows a counter-season pattern. Nevertheless, in the long run, the steer dressed weight exhibits an upward trend. Figure 3 illustrates this behavior, displaying an average increase of 4.95 pounds for every additional year (linear regression, dotted line). In 50 years, the average dressed weight has grown by approximately 30%. It means that nowadays, three steers produce almost the same amount as four steers in the seventies. Technological advancements, such as in nutrition, management, and genetics, help explain this phenomenal growth. 

Figure 1 – Steer Dressed Weight, Federally Inspected, Weekly

Figure 2 – Beef Graded Prime as Percent of Beef Graded, Weekly

Figure 3 – Steer Dressed Weight, Federally Inspected, Yearly

References

AMS/USDA. (2024, May 10). Retrieved from: https://publicdashboards.dl.usda.gov/t/MRP_PUB/views/LPMeatGradingDashboard/GradeData?%3Aembed=y&%3Aiid=1&%3AisGuestRedirectFromVizportal=y

ERS/USDA. (2024, May 10). Retrieved from: https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=77827

NASS/USDA. (2024, May 10). Retrieved from: https://quickstats.nass.usda.gov/

In general, the only old things that have much value are those that are rare and in extremely good condition. For instance, a Rembrandt would be a good example of an old thing that has a lot of value, or a 40 series John Deere tractor would be another! However, slaughter cows would be an example of a fairly common thing that has a strong value in today’s market. Or, maybe they are not all that common since there has been tremendous herd liquidation due to drought the past couple of years.

Slaughter cow prices generally reach their seasonal price peak in late spring or early summer. They may or may not have already peaked, but that is of little concern given the extremely high price level. Cow condition does influence their total value from both a weight and price standpoint, but slaughter cattle in most any condition are bringing a high price due to the need for lean grinding beef. Specifically, the boxed cow beef cutout value has increased from just over $200 to $270 per hundredweight since the beginning of the year.

Figure 1 contains weekly slaughter cow prices in Tennessee for breaking grade cows. The price of this class of slaughter cows has increased in price by about $35 per hundredweight since the beginning of the year and are $20 per hundredweight higher than any point in 2023. Assuming a 1,200 pound cow, the total value has increased from $1,140 per head to $1,560 per head since the beginning of the year, which is a $420 per head increase. 

The value increase in slaughter cows is being driven by cattle producers hauling fewer of these animals to town, which is seasonally driven by calving season being in full force and the fact that many cattle producers have already culled deep into the cow herd. The value of slaughter cows should remain high for the next couple of years.

Figure 1. Slaughter cow prices for 2024, 2023 and the 5-year average.

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Griffith, Andrew P. “Diamond Rings for Old Things.” Southern Ag Today 4(20.2). May 14, 2024. Permalink

Over the past several weeks, H5N1 (i.e., highly pathogenic avian influenza) affecting U.S. dairy herds has been making news. The most recent came last week when the USDA ordered that lactating dairy cows must be tested for H5N1 before being transported across state lines (USDA-APHIS, 2024) and the FDA reported finding remnants of the H5N1 virus in commercial milk supplies (US FDA, 2024). Importantly, officials state that milk and beef products remain safe.

Amid this market shock, futures price fluctuations for the dairy sector have been relatively small. Class III milk futures saw no significant price swings with March news reports, and prices on April 25 jumped by around 2.5 percent for the May contract potentially in response to lower production expectations. However, prices changed by similar or larger magnitudes five previous days since April 5. It is unclear if that price change was in line with general market uncertainty or due to the announcement.

In contrast, both feeder cattle and live cattle contracts saw large price drops during March news events. For example, June live cattle contracts dropped by nearly 2.75 percent the day a human case of H5N1 was reported. However, live cattle and feeder cattle prices moved higher on April 25.

For dairy markets, two things may be happening at the same time to create a relatively steady price situation. Supply may be dropping (due to lower milk production) while potential consumer fears reduce demand. In tandem, this could create relatively constant prices, but production and disappearance would drop. Production and disappearance data to support this should become available in the coming months.

For cattle markets, the main effect appears to be speculative consumer concerns that would drive down beef demand, thus reducing the value of cattle. This has materialized to a certain extent as Colombia banned imports of U.S. beef into the country. However, the price reaction on April 25 that saw prices move higher suggest that these initial fears may be short-term.

As more data and news come out, markets’ reactions may change. This area should be closely watched, especially given the tight supplies in the beef cattle market and production uncertainty in milk markets.

Figure 1: Nearby Contract Prices for Cattle and Milk Futures

Sources: 

US FDA. (2024, April 23). Updates on Highly Pathogenic Avian Influenza (HPAI). https://www.fda.gov/food/alerts-advisories-safety-information/updates-highly-pathogenic-avian-influenza-hpai

USDA-APHIS. (2024, April 24). Federal Order Requiring Testing for and Reporting of Highly Pathogenic Avian Influenza (HPAI) in Livestock. https://www.aphis.usda.gov/sites/default/files/dairy-federal-order.pdf

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Secor, William. “Mixed Impacts of H5N1 in Dairy Cows on Dairy and Beef Cattle Markets.” Southern Ag Today 4(19.2). May 7, 2024. Permalink

Dairy farmers in the Southeast, Appalachian, and Florida Federal Milk Marketing #7 (FMMO #7) orders are ultimately paid on the amount of skim milk and butterfat they produce. Growing demand for dairy products like cheese and butter have increased butterfat values and their impact on milk prices over time.  For some perspective, Figure 1 contains the historical Uniform Butterfat Price for the Southeast Federal Milk Marketing Order from 2000 to 2024. There has been significant volatility, and the impact of COVID is pretty clear, but the general upward trend is evident – butterfat has become increasingly valuable over the last 24 years.

In the interest of painting a complete picture, Figure 2 contains the Uniform Skim Price for FMMO #7. As with the butterfat series (Figure 1), volatility is clearly present. One can see strong skim milk price levels in 2007, 2014, and 2022, but one can also see multiple times when skim milk prices were south of $10 per cwt. The slight upward trend over time in skim milk price is not as evident as the trend in butterfat prices. 

Because butterfat only represents a small percentage of the milk that is produced, it is easy to underestimate its significance on milk price at the farm level. To emphasize, for the month of March 2024, the uniform skim milk price was $11.23 per cwt and the butterfat price was $3.2099 per lb. When uniform milk prices are calculated by the orders, they are done so by assuming 3.5% butterfat levels. With that 3.5% butterfat assumption and a $3.2099 butterfat value per lb, each cwt of milk yields a butterfat value of $11.23 (3.5 lbs @ $3.2099 per lb). At the same time, the skim milk value from a cwt of milk was calculated to be $10.84 (96.5 lbs @ $11.23 per cwt). Combining the butterfat and skim values results in a uniform milk price of $22.07 per cwt for the month of March. This calculation can be seen in the first row of Table 1. Note that even at 3.5%, the butterfat value represents just over half of the uniform milk value. 

This uniform milk price does not represent the price that an individual dairy producer would receive as that would be impacted by any premiums and/or deductions, as well as how their location differential compares to that of the base zone. Readers should use the specific prices with caution as they are just used for illustration. But, the difference in milk price as butterfat increases is very telling. Note that each additional 0.25% increase in butterfat results in an increase in milk value of $0.77 per cwt. Table 1 also illustrates the same milk price calculation for butterfat percentages from 3.5% to 5.0%. At 5%, milk price exceeds $26 per cwt, and butterfat accounts for over 60% of that value. Given the value differences calculated in Table 1, it is clear why increasing butterfat has been a focus of many dairy farmers in recent years. It is important to note that Table 1 looks only at price and does not consider the potential for increased expenses that may be associated with increasing butterfat.  

Table 1. Uniform Skim Milk and Butterfat Price and Their Impact on Milk Value

% Butterfat	Skim Milk Value	Butterfat Value	Milk Price	% of Value from Butterfat
3.50%	$10.84	$11.23	$22.07	50.9%
3.75%	$10.81	$12.04	$22.85	52.7%
4.00%	$10.78	$12.84	$23.62	54.4%
4.25%	$10.75	$13.64	$24.39	55.9%
4.50%	$10.72	$14.44	$25.17	57.4%
4.75%	$10.70	$15.25	$25.94	58.8%
5.00%	$10.67	$16.05	$26.72	60.1%
Estimated from March 2024 Uniform Price Computations for FMMO #7. Uniform Skim Milk Price was $11.23 per cwt and Uniform Butterfat Price was $3.2099 per lb.

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Burdine, Kenny. “Butterfat Continues to be a Major Driver of Milk Value.” Southern Ag Today 4(18.2). April 30, 2024. Permalink

Included in the biannual Cattle report is the number of milk cows that have calved in the U.S. and by most individual states. The number milk cows that have calved are holding steady at the national level but individual states in the Southeast show variations in inventory (Table 1). Florida is the only state that shows an increase in milk cows that have calved, while Arkansas, Louisiana, and South Carolina had double digit percentage losses. The thirteen Southeastern states account for 11.33 percent of the milk cows that have calved in the U.S. Texas has the largest number of milk cows in the Southeast and has the fourth highest milk cow inventory in the U.S.

Table 1.	2023	2024	Percent of
	(1,000 head)	(1,000 head)	previous year
Texas	650	635	98
Florida	92	98	107
Georgia	92	91	99
Virginia	67	66	99
Kentucky	45	43	96
North Carolina	39	38	97
Oklahoma	39	38	97
Tennessee	26	25	96
South Carolina	9	8	89
Louisiana	8	7	88
Mississippi	6	6	100
Arkansas	4	3	75
Alabama	2	2	100
U.S.	9,397.50	9,356.80	100

In addition to inventories, milk production per cow is a crucial factor for the dairy industry. Using the 2023 annual production estimates from USDA Quick Stats database, Texas is the only Southeastern state that has a per cow milk production average that is higher than the U. S. average of 24,117 pounds of milk per head, as seen in table 2.

Table 2.
	Annual Milk Production
	Pounds/Head
TEXAS	25,802
NORTH CAROLINA	23,526
GEORGIA	22,275
VIRGINIA	20,882
KENTUCKY	20,333
FLORIDA	20,313
TENNESSEE	18,680
SOUTH CAROLINA	18,500
OKLAHOMA	17,692
ALABAMA	14,000
LOUISIANA	12,625
MISSISSIPPI	12,333
ARKANSAS	11,000
U.S. Average	24,117

Milk production in the U.S. is increasing over the long term but, it’s coming from regions other than the Southeast. For more than a year, dairy producers have suffered from disastrously low milk prices and low returns.  The result of low milk prices has been declining dairy cow numbers, milk production per cow falling below year before levels, and reduced total milk production in some months reversing the long term trend of increasing milk production.  

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Runge, Max . “Milk Cows in the Southeast.” Southern Ag Today 4(17.2). April 23, 2024. Permalink