Category: Livestock Marketing

Amid the run to record high calf prices in recent weeks, the cow market is higher too.  Cow prices are higher on tighter supplies of cows and beef as we get closer to grilling season (it’s always grilling season for most of us down here).  

Since the beginning of the year, total cow slaughter is about 9.4 percent lower than last year.  Beef cow and dairy cow slaughter are lower than a year ago.  Dairy cow slaughter tends to be its highest early in the year before declining in Summer.  Beef cow slaughter is pretty close to the 5-year average.  You’ll notice in the attached charts that beef cow slaughter tends to pick up mid-year before hitting its peak in Fall.  

Cull cow prices tend to increase seasonally into late Spring and early Summer.  Auction prices have shown a lot of volatility bouncing between $85 and $105 per cwt over the last 4 weeks.  National average direct cutter quality cows have continued higher hitting $104.53 per cwt last week.  The boxed cow beef cutout has increased from $205 in January to $246 last week.

More impressive than the increase in cull cow prices is the increase in lean beef prices for ground beef.  The 90 percent lean boneless beef wholesale price has increased from $255 to $317 per cwt so far this year.  A real contrast has developed between the 90 percent lean and the 50 percent lean price.  Fifty percent lean prices are about 20 percent, about $26 per cwt, lower than last year.  The contrast really highlights the tight supply situation in the cow and cow-beef market and the fed cattle market.  Heavier weights are likely contributing to some relatively higher supplies of 50 percent lean beef.  We seem to have plenty of fat to go with not enough lean.  

What to Watch For

Cull cow prices should continue to increase seasonally over the next couple of months.  Cull cow prices will look attractive compared to future calf prices from her offspring.  Once grilling season gets a little closer, watch for increasing middle meat (steak) prices.  High lean beef wholesale prices and tight supplies will continue to boost beef imports.  We’ll begin to hear more about cow plants struggling to find supplies and going further and further out to buy cows and boosting bids more.  Even more stress will be put on fast food restaurant chains selling hamburgers and pressure on ground beef prices at grocery stores.   

A Note on This Friday’s Cattle on Feed Report

USDA will release its latest cattle on feed report on Friday afternoon.  Watch for placements higher than a year ago.  We are likely to see a rare event where February placements are larger than January’s placements.  Higher placements will continue to leave more cattle on feed compared to a year ago.

Feeder cattle prices are at or above record levels across all categories. Today’s chart shows average monthly prices for four steer weight categories in Oklahoma City. Average prices during February 2024 were up approximately 35 percent above year-ago levels and were roughly 60 percent above February 2022 levels. The current prices have met or exceeded the price records previously set during the Fall of 2014.

Cattle supplies have tightened in recent years as cow-culling increased and producers have held back fewer heifers as replacements. Drought conditions, higher input costs, and tight profit margins have been key factors for the decline in inventory. The estimated number of calves produced in 2023 was 33.6 million head which was similar to the 2014 level and down by more than 3 million head since 2018. The number of calves produced in 2024 will very likely be lower again because we are starting the year with fewer beef cows expected to calve. Higher prices are a response to these tighter supplies and should eventually incentivize expansion as producers’ financial situations improve. 

The majority of cattle producers in the U.S. sell their calves in the fall months and the current expectations are for prices to remain strong through 2024. CME feeder cattle futures contracts for the fall months are trading near $2.70 per pound. For reference, the CME feeder cattle contracts have never settled above $2.55. The strong expectations for cattle are leading to attractive risk management opportunities for producers. Whether it is using futures, options, or USDA Livestock Risk Protection (LRP), now is a great time to analyze price risk management tools. 

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Maples, Josh. “Record Feeder Cattle Prices.” Southern Ag Today 4(11.2). March 12, 2024. Permalink

On February 13^th, USDA-NASS released the 2022 Census of Agriculture report.  This report provides a comprehensive agricultural overview for each state and county. The report provides information on farm operations, livestock inventory, milk production, commodity production and value of commodity production.  Hay (including alfalfa) production ranked in the top three for value of crop commodity production in six of the thirteen Southern region states.  Those states were Virginia, Kentucky, Tennessee, Texas, Alabama, and Oklahoma. 

The census is conducted and published every 5 years and is loaded with useful data about U.S. hay production.  In addition to this 5-year look at hay production, USDA Agricultural Marketing Service (AMS) report provides weekly hay prices in many markets and USDA National Agricultural Statistics Service reports annual production, hay stocks, and monthly prices received by farmers.   This wealth of information can aid in pricing knowledge.  

Drought conditions in recent years has brought attention to hay and forage which is an important input for livestock production.  There are challenges in the valuation of a hay crop.  Given the differences in form, weight, quality, species of forage, and regional availability.  Therefore, no reference price is established.  There are market reports provided by USDA that provide some market data but are geographically limited in the south. The Census of Agriculture reports state level data. 

All states in the southern region reported price data for hay, excluding alfalfa.  Fig. 1 contains the reported price per ton for hay, excluding alfalfa for the 2022 Census of Agriculture.  To better explain the price of hay, $/ton to $/bale will be assumed to be a 4X5 round bale at 880 lbs.  If the average price was $142/ton, then the bale price was $62.  Fig. 2 illustrates the reported price per ton for alfalfa for the 2022 Census of Agriculture.  As previously stated, $/ton to $/bale conversion is the same calculation.  The average price per ton was $229/ton, which caclulates to $101/bale.  

Figure 1.  Hay Price per State in the 2022 Census of Agriculture.

Figure 2.  Alfalfa Price per State in the 2022 Census of Agriculture.

Last Friday, the USDA released its monthly cattle on feed (COF) report. While some COF categories/numbers are reported consistently each month, the USDA also sprinkles in unique quarterly and annual numbers in these monthly reports. Last week’s report included two items that were unique, “Cattle on Feed by Class on 1,000+ Capacity Feedlots and Quarter – States and United States: 2023”, and “Feedlots, Inventory, and Marketings by Size of Feedlot – United States: 2022 and 2023”. 

The Cattle on Feed by Class on 1,000+ Capacity Feedlots and Quarter data offers insights that are more in-depth than January 1 estimates. It shows the quarterly estimations of heifers and heifer calves, by major fed cattle state, by quarter. On October 1, 2023, there was a total of 4.64 million females on feed. Two weeks ago, Southern Ag Today highlighted the reduced number of heifers being retained as replacements (Griffith, 2024). Figure 1 contains the number of heifers on feed for each quarter of 2023, by state. In Oklahoma, the reports indicate that females on feed were decreasing until the last quarter (October 1). In Texas, quarter 2 (April 1), peaked in terms of number of females in all fed states but also with most females on feed in 2023, then maintained throughout the last two quarters of the year. The number of heifers on feed are historically large.  While the January 1, 2024, number of heifers on feed are not reported by state, more heifers were reported on feed on January 1, 2024 (4.735 million head) compared to January 1, 2023 (4.66 million head). 

Figure 1. Heifer and Heifer Calves on Feed by Class on 1,000+ Capacity Feedlots and Quarter (Source: USDA)

Figure 2 contains the number of feedlots by head capacity (over 1,000 head) in 2022 and 2023.  The cattle on feed report only includes feedlots with 1,000 or more head on feed.  The February cattle on feed report and the annual cattle inventory report provide some insight into the number of head on feed in smaller feedyards.  Feedlots with fewer that 1,000 head decreased in number from 24,000 in 2022 to 23,000 in 2023.  While those smaller yards had a few more head on feed than the year before, their total marketings in 2023 declined 4.5 percent in 2023 compared to 2022.  

Figure 2. Feedlots by Size of Feedlot – United States: 2022 and 2023 (Source: USDA)

The total number of feedlots decreased from 26,093 in 2022, to 25,103 in 2023.  Tighter feeder cattle supplies might be expected to reduce the number of feedyards.  The feedlots with capacities of 1,000-1,999, 8,000-15,999, 16,000-23,999, and 32,000-49,999 increased in total numbers compared to the previous year. Whereas feedlots with capacities of 2,000-3,999, 24,000-31,999, and 50,000 and over decreased in total numbers compared to the prior year. 

Tighter feeder cattle supplies, made even tighter by herd expansion, over the next few years will likely stress feedlots numbers. Although the long-term trend of feeding a larger percentage of total cattle for longer periods of time will help.

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Martinez, Charley. “Heifers on Feed and Feedlot Demographics.” Southern Ag Today 4(9.2). February 27, 2024. Permalink

In the previous SAT livestock article, Dr. Griffith asked about the girls’ whereabouts. Last week, the USDA/NASS released the 2022 Agricultural Census. Every five years, the Census takes a snapshot of U.S. agricultural operations. There is a wealth of interesting insights in the census data.  The data also sheds light on the structural changes in beef cow operations. The decrease in beef cow ranches could slow future herd expansion. 

Figure 1 highlights the decline in beef and milk cow farms. Between 2017 and 2022, 106,844 beef cow ranches disappeared, a 15 percent drop. In the same period, milk cow farms decreased by 34 percent. In contrast to the 2012 drought, we have fewer beef cow ranches to rebuild the herd, making it more challenging to find our girls. The contractions in cow farms are steeper than the overall number of farmers, which has declined by 6.9 percent, according to USDA/NASS. 

Figure 1 – Number of Cow Farms: 2002 – 2022.

Although there has been a decline in beef cow farms, the Census has reported an increase of 1,034 ranches with more than 500 head (Fig. 2). From 2017 to 2022, the beef cow herd has decreased by 2.5 million head. However, there has been an increase of 839,603 head in farms with more than 500 head. It indicates industry consolidation, providing insights into where we may find our girls.   

Figure 2 – Number of Beef Cow Farms by Herd Size: 2017 – 2022.

Beef cow farms shrunk across all farm size categories (Fig. 3). Most beef cow ranches are between 10 and 49.9 acres. Between 2017 and 2022, this category displayed the smallest drop, 9 percent, showing its resilience. But, during this period, the extremes recorded the most significant declines, producers with 1 to 10 acres declined by 23 percent, and 1000 to 2000 acres ranches declined by 20 percent. Regardless of the production scale, environmental, and economic factors affected beef cow ranches’ survivorship.

Figure 3 – Number of Beef Cow Farms by Herd Size: 2017 – 2022.

The 2022 USDA/NASS Agricultural Census reported a decline in beef cow operations from 2017 to 2022.  The census also reported some growth in larger operations.  The effect of fewer total operations on the speed of herd rebuilding remains to be seen.

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Calil, Yuri. “Ag Census Reveals Fewer Beef Cow Farms.” Southern Ag Today 4(8.2). February 20, 2024. Permalink