Category: Livestock Marketing

In last week’s Southern Ag Today article, Andrew Griffith discussed whether the ranchers should feed or breed their heifers in the current market. He stressed the relevance of feed, capital, and labor costs. Here, I briefly discuss the prices of two crucial feed inputs: corn and hay. Along with pasture quality, these inputs are essential for herd recovery and expansion.

While cattle prices continue to have an upward trend, corn markets show a different pattern. Global ending stocks (311.05 MMT) and plentiful production in the U.S. (15.1 B bushels) are driving corn prices down (Figure 1). Last August, corn prices hovered above $7/bu. Recently, corn is trading below $5.50/bu. Of course, lower corn prices boost feeder prices. 

Figure 1 – 600-900 Feeder and Corn Prices: Aug/2022 – Aug/2023

The price and availability of hay is also crucial to the decision to retain animals. Hay is the 3^rd largest crop in the U.S. by number of acres harvested (USDA-NASS). Figure 2 contains U.S. average hay prices. Fertilizer and fuel costs swelled forage production costs and drought cut production in many areas of the country.  Higher hay prices than last year suggests we are still suffering from the effects of drought. 

Figure 2 – Hay Prices

USDA’s latest hay production report indicates some growth in hay inventory. Nationwide, hay supplies are expected to rebound about 5 percent compared to last year.  But, longer term, hay production has declined 24 percent over the past 20 years. Yields have declined from 2.48 to 2.29 tons/acre during the same period. 

While much of Louisiana and Texas remain in drought, most of the rest of the South is drought free. Less expensive feed and better pasture conditions may provide opportunity for some herd growth.  

References

Griffith, Andrew P. To Breed or To Feed? Southern Ag Today 3(34.2). August 22, 2023. Permalink

USDA – NASS (2023). Available online: https://quickstats.nass.usda.gov/

Beef Cattle Decision Aids. Available online: https://agecoext.tamu.edu/resources/decisionaids/beef/

To breed or to feed, that is the question? In an October 2022 article, bred heifer values for 2023 were discussed. The projected value for bred heifers in Tennessee during 2023 was between $2,400 and $2,600, which is exactly the value that many of the bred heifers traded for in the spring. The question now is if a producer should retain heifers from the spring calf crop for breeding or if they should set wheels under them for feeding.

Despite bred heifer values hitting the price projection this spring for fall calving females, it is beneficial to consider the expected value for those animals moving forward. Given the expectation that calf values will hold firm, the bred heifer value could reach $3,000 to $3,200 per head this fall and moving into late winter. Thus, should a producer retain those animals and breed them, or should the producer sell the female at weaning or as a yearling? A weanling 550 pound heifer in Tennessee is currently valued near $1,265 per head while a load of 750 pound black heifers is valued near $1,770 per head (Figure 1).

The answer to this question is not simple. Here are a few considerations. First, are the heifers being retained and bred to go back in the retaining producer’s herd or are they meant for resale? If they are meant for the retaining producer’s herd then calf price projections moving forward are important. If the females are meant to be sold then a producer needs to make sure they have a marketing outlet for those females. Second, it takes feed, capital, and labor resources to retain heifers. If any of these are in short supply then critical pencil and paper work need to be done. Third, is it worth the risk to forgo the calf or feeder cattle value to breed females?

In closing, the demand for bred heifers or bred females, in general, is regional at this point. Some regions do not have the hay and forage resources to begin retaining heifers while other regions do. Producers should consider their resources and expected demand for bred females before jumping into this market.

Figure 1. Weekly Tennessee prices for 500-550 pound and 750-800 pound heifers.

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Griffith, Andrew P. “To Breed or To Feed?” Southern Ag Today 3(34.2). August 22, 2023. Permalink

USDA is scheduled to release the August Cattle on Feed report this coming Friday, so this is a good opportunity to look at some pre-report estimates.  

I think placements will be the most interesting number in the report.  A couple of years of a shrinking cow herd leads us to fewer feeders to place. However, drought in some major cattle areas, falling feed costs, profitable feeding returns, more cattle imported from Mexico compared to a year ago, and high feeder heifer prices may cause placements to not be down as much as we might expect. My estimate of placements is 96 percent of a year ago (down 4 percent).  I am on the high end of placements among the market analysts who publish estimates ahead of the report.  

Placements are where the most uncertainty lies.  The number of heifers placed in feedlots are a large source of this uncertainty.  Heifers can be held back to enter the cow herd or they can be sold to go on feed.  Currently, high calf prices and expectations of even higher record prices in the future should eventually begin to encourage producers to hold back heifers to enter the cow herd.  But, high current calf prices also encourage ranchers to take the money and sell heifers now as feeders.  Examining cattle auction prices suggests that, in some cases, feeder heifer prices are higher than prices of animals designated as replacement heifers and bred cow prices.  There is certainly anecdotal evidence of some producers selling heifers they had intended to keep because current prices were too good to pass up.  

The number of heifers on feed is reported quarterly and was in last month’s Cattle on Feed report.  It indicated that the number of heifers on feed was equal to the same quarter of last year while fewer steers were on feed.  We’ll get another quarterly report of heifers on feed in the October Cattle on Feed report. 

Based on steer and heifer slaughter, July marketings from feedlots with more than 1,000 head should be about 5.4 percent lower than a year ago.  Combined with fewer placements, this leaves the number of cattle on feed at about 98.5 percent of a year ago.  Some more data this Fall will shed some light on how much we are “robbing Peter to pay Paul” by using heifers to boost near term beef production at the expense of future production.

As we approach the fall months, folks in the cattle industry might expect to see some weakness in cattle prices as many producers sell their spring born calves. However, 2023 could shape up to be one of the abnormal years when the broader upswing in prices outweighs the typical seasonal pressure. 

The chart above uses monthly average prices for 500-600 pound medium and large #1 steers sold at auctions in Texas. The lines for 2014, 2015, and 2023 use the left axis and are dollars per hundredweight. The solid black line with markers represents the 10-year average monthly index values from 2013-2022 and uses the right axis. Without getting too deep into the details, this index calculation is one way to visualize seasonal patterns. An index value of 96 (October) means that during 2013-2022, prices were 4 percent lower than the annual average. Similarly, an index value of 103 (March) means prices were 3 percent higher than the annual average.  

As the chart shows, normal seasonal patterns would suggest falling prices for the next few months for 5 weight cattle. But 2023 has been anything but normal. History shows us years when prices seem to mostly ignore within-year seasonal patterns because of broader uptrends or downtrends in prices. 2014 is an example year when prices rose throughout the year and overshadowed seasonal patterns. 2015 is an example of a market downtrend that concealed seasonal patterns, 

So far in 2023, this year has been more similar to 2014 with prices rising steadily throughout the year. Instead of the typical dip from March-May, prices rose in 2014 and 2023. This could well be the story this fall too as overall strength in cattle markets (and tighter supplies) outweighs the within-year seasonal patterns we might expect. 

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Maples, Josh. “Counter Seasonal Runs in Cattle Prices.” Southern Ag Today 3(32.2). August 8, 2023. Permalink

It seems like a long way to Thanksgiving but, in a production sense, most plans are already made for turkey production for the Fall.  Thanksgiving turkey prices have been a hot topic for the last couple of years as high prices were fueled by reduced production due to High Pathogenic Avian Influenza (HPAI), high feed, other costs, and changing demand.  Now, producers have had a chance to respond to high prices by increasing production.  Increasing supplies are driving down prices providing some hope for lower prices this Fall.

For the year, turkey production is 3.4 percent greater than last year but that masks that production has jumped even more dramatically in the last 8 weeks.  In the last 8 weeks ending July 15^th, turkey production is 12.3 percent greater than the same period last year.  Last year’s production was greatly impacted by HPAI. Normally, production peaks seasonally in October just in time for Thanksgiving.  With the latest June data indicating that poults placed for grow out is 3.5 percent greater than June 2022 and poults hatched were 4.3 percent more than a year ago, it looks like production will remain above a year ago.

The amount of turkey in cold storage increases throughout the year before being drawn down in the Fall.  Total turkey cold storage stocks in June were about 6.3 percent above a year ago. It’s important to note that the increase is in breasts and other cuts.  Whole birds in storage are about 5.5 percent below last year.  While we normally think of the whole birds for the holiday, turkey breasts are an important part of grocery deli sections, sandwich restaurant chains, and other retail outlets.  

Turkey prices have declined since the first of the year and are now below a year ago for both whole birds and boneless, skinless breasts.  For the week of July 22, 2023, 8-16 pound frozen hens were $1.45 per pound compared to $1.55 per pound the same week last year.  Bigger, 16 to 24 pound, toms were $1.40 compared to $1.57 a year ago.   The breast market has seen a much more dramatic decline in price, 61.5 percent, from $6.65 a year ago to $2.56 per pound this year.

More turkey production and lower wholesale prices are providing the opportunity for lower turkey prices this Fall.  After the last couple of years, that’s some good early Thanksgiving news!

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Anderson, David. “Is It Too Early to Talk Turkey?” Southern Ag Today 3(31.2). August 1, 2023. Permalink