Category: Livestock Marketing

Nestled down in the bowels of the Consumer Price Index (CPI) data that is released each month is the retail price of beef, pork, and chicken.  Each have reached record highs at some point in the last couple of years adding to overall food price inflation.  The latest CPI data for meats indicated some stabilization or decline in meat prices.  

First off, it’s worth remembering what this data represents.  It is the price of various cuts of beef, pork, and chicken reported from grocery stores during the second week of the month.  The data does not include special features, sales, in store coupons, or customer loyalty card discounts.  As a grocery store price, it does not include meat prices at restaurants. 

Meat prices (and production for that matter) exhibit a considerable amount of seasonality.  Both supply and demand factors contribute to price seasonality.  For example, on the supply side, pork production tends to peak in the Fall after hitting its seasonal lows in Summer.  Tighter supplies in the Summer would suggest that prices should peak in Summer.  But, on the demand side, individual cuts may peak at different times of the year, for example, hams at the holidays or grilling season favorites.  Economists often compare the most current price to those of last year at the same time, simply to account for normal seasonality of prices.  But, for many consumers thinking about inflation a more useful comparison might be to last month or the last couple of months to account for the trend in prices.

The latest data represents June prices across the U.S.  The Choice beef price in June was $8.119 per pound, less than 1 cent per pound higher than May.  So far this year, Choice beef prices peaked in April at $8.151 per pound.  Compared to a year ago, beef prices were about 2 cents lower per pound.  Pork prices totaled $4.88 per pound in June compared to $4.919 per pound in May and $4.684 per pound in June of last year.  Chicken prices are reported in two ways: as a whole, fresh bird retail price or as a composite price made up of various cuts.  The composite retail price was $2.403 per pound in June compared to $2.44 in May and $2.504 in June 2023.  

On the whole, the latest retail meat price data indicates some easing of meat price inflation in June.  Some recent falling cutout values for beef and pork related to more production of both relative to last year could be part of the reason for lower prices.  Some consumer push back against high prices could have pressured prices lower as well.  Retail prices the rest of the year will be affected by reduced beef supplies and more pork and poultry.

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Anderson, David. “Retail Meat Prices Ease a Little.” Southern Ag Today 4(29.2). July 16, 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

The fed cattle market hit some new record highs last week with fed steers pushing $200 per cwt in Northern Plains markets.  The weekly average fed steer price for the week ending June 30^th was $198.09 per cwt.  This price represented a negotiated, live, weighted average price across quality grades.  The comparable price in the Texas-Oklahoma market last week was lower at $190.19 per cwt.  

Beyond the record high fed cattle price, the widening price difference between the Southern and Northern fed cattle markets is very interesting.  Last week’s Northern-Southern price spread was $7.90 per cwt.  It was $10.11 per cwt two weeks ago, the largest difference of the year.  This large price spread has really developed over the last couple of years.  The price difference has a large seasonal component with the price difference peaking in the May-July time period.  Prior to 2022, a price difference greater than $4 per cwt was rare.  The average price difference from 2015 through 2021 was $0.20 per cwt.  That average has grown to $0.96 during 2022-2024.  The range of price differences has grown from about $6 per cwt to over $12 per cwt.

Several factors likely contribute to larger swings in regional price differences.  One may be simply varying relative supplies versus packer needs in each region.  Another contributor is the mathematical calculation of the average price across grades.  The Southern Plains average price includes head in lots 35-65 percent Choice compared to no lots with cattle in that category for the Nebraska prices which pulls down the Texas-Oklahoma average price.  So, there may be a USDA quality grade component to the price difference.  

Record high fed cattle prices are supporting calf and feeder prices across the South.  As fed cattle supplies further tighten, new record high prices will be recorded.  The widening price difference regionally in fed cattle may have some implications for Southern feeder cattle and calf markets.  Many of our cattle in the mid-South go to feedlots in Nebraska while feeders from the deep South often head to Texas or Oklahoma yards.  Regional calf and feeder prices may begin to be affected by changing premiums in the regional fed market.

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Anderson, David. “New Record High Cattle Prices.” Southern Ag Today 4(27.2). July 2, 2024. Permalink

Many analysts expect the beef cattle industry to expand the cowherd in 2025. This won’t be confirmed until the release of the January 2026 Cattle Inventory Report. When herd expansion begins, replacement heifers and bred cows will become increasingly valuable. As one might expect, replacement heifer and bred cow prices are correlated with feeder cattle prices. 

Cows that are open but otherwise healthy can enter two marketing channels: cull cow or bred cow markets. In most circumstances, cows leaving a cow-calf operation are sold as open cull cows. However, cyclical cattle inventories and supply dynamics provide scenarios where the value of bred cows dominates the value of open cull cows because of herd expansion.

The orange line in the figure is the price of a Breaking 75-80% cull cow sold in Joplin, MO. Breaker cows correlated approximately to a cow with a body condition score of 7-8. So, a cow that is open but in good condition. The green line in the figure is the price of a cow that is 4-9 months bred and sold in Joplin, MO. The blue line is the price of a bred cow compared to that of a cull cow. A price ratio that is less than one indicates that a cow is worth more as an open cull cow. A price ratio greater than one indicates that bred cow value dominates cull cow value. An increase in the price ratio implies that bred cow prices have increased faster than cull cow prices. This increase in the ratio is a function of where the industry finds itself in the cattle cycle.

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Mitchell, James. “The Relative Value of Bred Cows.” Southern Ag Today 4(26.2). June 25, 2024. Permalink

USDA’s next cattle on feed report is to be released on Friday, June 21^st.  This one is coming out against a backdrop of rising fed cattle prices, higher Choice beef cutout values, and beef production that is slightly larger than last year.  It’s going to be an interesting report because it should continue to show declining numbers of cattle in feedlots and indicate falling beef supplies in coming months.

Market analysts who publish pre-report estimates generally expect May feedlot placements to be smaller than those last May.  The range of estimates runs from placements down 5 percent to up 1 percent (I’m the analyst who is down 5 percent on placements).  USDA reports that the number of feeder cattle going through auctions, video and internet sales, and direct sales were down 4.8 percent compared to those last May.  The number of feeder cattle in May reported as part of the CME feeder cattle index was down 19.5 percent compared to a year ago.  Contrasting those data points, feeder cattle imports from Mexico were about 30,000 head larger than last year.  

Feedlot marketings should be about even with a year ago.  Daily steer and heifer slaughter during May was 100.4 percent of last May, with the same number of work days in the month.  Continued near record dressed weights of those cattle marketed, largely due to longer feeding periods, is adding to beef production.  

Combining placements and marketings should leave the number of cattle in feedlots on June 1 about 1.7 percent smaller than last year.  June 1 should mark the second straight month of smaller cattle inventories.  The number of cattle on feed for longer than 120 days should continue to decline, as well.  Shrinking cattle inventories will begin to cut into beef production in coming months limiting the impact of heavier weights on supplies.  On balance, fewer cattle on feed will keep pressure on for higher cattle and calf prices.

Anderson, David. “A Cattle On Feed Preview.” Southern Ag Today 4(25.2). June 18, 2024. Permalink