Category: Livestock Marketing

We have been negligent here at Southern Ag Today in not adequately covering the hog and pork market, but today we are going to make up a little for that oversight.  Southern states had about 19 percent of the U.S. breeding hog inventory on December 1, 2021.  USDA’s next annual inventory report will be released on December 23, 2022.  While more hogs are produced in the Corn Belt, the South is known for pork, whether whole hog bbq, ribs, or country hams from iconic producers.  

For the year, pork production is about 2.2 percent below last year.  Production is on pace for about 27.2 billion pounds which would be the least since 2018.  The September USDA quarterly national inventory report indicated about 0.7 percent fewer breeding hogs and farrowings which likely means a smaller pig crop and fewer market hogs in 2023.  

While hog prices in 2022 have been higher than in 2021 for most of the year, they have not translated to enough profitability to generate expansion.  Several factors have combined to limit production.  High feed costs have cut into returns, as they have in the rest of livestock production.  Animal disease and difficulties with sow mortality have cut production and increased costs.  Higher facility production costs have reduced expected investment profits.  Higher anticipated future costs and uncertainty due to Proposition 12 has also been cited as a reason for restrained production. 

On the pork side, wholesale ham prices have been significantly higher than last year since June.  Strong ham exports, high turkey prices with hams as a potential substitute, and fewer hams in cold storage have pushed prices higher.  Belly prices, while exhibiting their typical volatility, have been lower than last year since April.  In October, 40.2 million pounds of bellies were in cold storage compared to only 11.6 million pounds the year before.  

Tight supplies and likely high prices will be the ongoing story in the hog and pork market for most of 2023.  Any increase in production will be delayed until late in the year, at best.

Author: David Anderson

Professor and Extension Economist Livestock and Food Products Marketing, Dairy, Policy

danderson@tamu.edu

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Anderson, David. “High Hog And Pork Prices This Year.” Southern Ag Today 2(49.2). November 29, 2022. Permalink

We are approaching the end of 2022 and are getting a more complete picture of beef cow and heifer slaughter and its implications for future supplies. Through October, heifer slaughter is up about 5 percent (402k head) and beef cow slaughter is up 13 percent (375k head) as compared to a year ago. The bulk of the increase in national beef cow slaughter has occurred in the South with beef cow slaughter across the two Southern regions being 271k head higher than a year ago. In particular, beef cow slaughter in Region 6 (AR, LA, NM, OK & TX) is up nearly 30 percent. 

Shown in the chart is a regression trend line that was estimated by the Livestock Marketing Information Center (LMIC) using the relationship between beef cow/heifer slaughter and the prior year’s inventory. Or put differently, it is how many cows and heifers were processed this year as compared to how many beef cows we started with. The numbers on the bottom axis (0.32 to 0.48) are proportions. A proportion of 0.4 means that beef cow and heifer slaughter was 40% of the starting beef cow inventory that year. The numbers on the left axis show the annual change in beef cow inventory. A change equal to 1 would mean no change, 1.02 is a 2% increase, and 0.98 means a 2% decline. Using 2014 as an example, the graph shows that cow/heifer slaughter during 2014 was about 41% of the beef cow inventory on January 1, 2014, and the beef cow herd declined just over 2% that year. 

2022 is shaping up to be an exceptional year. The orange square on the graph for 2022 represents an estimate for 2022 that assumes the remaining slaughter weeks in 2022 are similar to year-ago levels. In that scenario, the proportion of beef cows and heifers slaughtered would be about 47%. Using this analysis, that would suggest a decline in beef cow numbers somewhere around the 4% to 5% during 2022 which would be levels not seen since 1985-86. Given that most of the beef cow slaughter increase has occurred in the South, it seems likely that cow inventories in these states could decline even more than the national decline. 

Author: Josh Maples

Assistant Professor, Livestock, Production Economics, Commodity Marketing

josh.maples@msstate.edu

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Maples, Josh. “Exceptional Cow and Heifer Slaughter.” Southern Ag Today 2(48.2). November 22, 2022. Permalink

Beef, pork, and chicken prices are included in the consumer price index (CPI) released monthly.  Last week’s October CPI indicated meat prices going in opposite directions.  Two average retail beef prices are reported: Choice beef and the All Fresh beef.  The Choice beef price is an average beef price of USDA Choice quality grade.  The All Fresh includes fresh beef of any USDA grade.  The average retail pork price and broiler price are reported representing various cuts.

The average retail Choice beef price was $7.42 per pound, down 6.1 percent from the record high of $7.90 per pound in October 2021.  Choice beef was also $0.18 per pound lower than in September.  The all fresh price declined to $7.25 per pound in October from $7.32 in September.  

While beef prices have declined, pork and chicken prices have increased.  The October retail pork price was the highest on record.  The average retail pork price increased to $5.04 in October, up 4.7 cents per pound from September and 23 cents higher than a year ago.  The average broiler retail price declined almost 3 cents per pound from September, however chicken is still 34 cents per pound (22.3 percent) higher than a year ago.

When thinking about demand, relative prices for competing meats are often of interest.  Beef has become less expensive relative to pork and chicken, even though beef continues to be more expensive in absolute terms. October’s pork price was the most expensive relative to beef since July 2014.  Chicken was relatively the most expensive relative to beef since December 2020.  Beef and chicken prices are likely to continue to decline as wholesale prices are well below a year ago and large supplies are available.  Pork prices will likely continue to increase due to tight supplies of pork.

Author: David Anderson

Professor and Extension Economist Livestock and Food Products Marketing, Dairy, Policy

danderson@tamu.edu

Anderson, David. “Retail Beef Prices Lower, Pork Higher.” Southern Ag Today 2(47.2). November 15, 2022. Permalink

Typically, beef cow culling peaks, nationally, during the last few weeks leading up to Thanksgiving.  The rapid pace of cow culling was documented in SAT back in early September, focusing on the South.  At that time, there was some hope that the pace of culling might slow in the Fall due to large numbers sent to market earlier.  Those hopes have failed to materialize as beef cow slaughter hit 84,800 head for the week ending October 22^nd.  That is the largest weekly beef cow slaughter since the week of November 19^th, 2011. 

Total beef cow culling is up 364,000 head in 2022 over 2021.  All of the increase comes from states in the Southern half of the U.S. and the Plains.  Slaughter in Region 6, which includes Texas and Oklahoma, is up 207,000 head over last year.  Region 7, including Kansas and Nebraska is 171,000 head above 2021.  Slaughter is up 59,000 head in the deep South and 12,000 head in the Southwest.  Beef cow slaughter is lower than last year in the rest of the country.  Increased culling continues to largely coincide with areas experiencing drought.  Costs increasing faster than calf prices have also encouraged culling.

Cow prices typically bottom out in the Fall, as slaughter peaks, and this year is no exception.  Prices have fallen below a year ago in local auctions in drought hit areas, especially for thin, lean cows.  Prices have been as much as 20 percent above a year ago, even though trending lower, in local auctions away from drought areas and for cull cows in better shape.  

Watch for beef cow slaughter in the coming weeks to see if it maintains an 85,000 head per week pace.  The more sent to market now means an even larger decline in the cowherd for next year and higher prices to come.

Author: David Anderson

Professor and Extension Economist Livestock and Food Products Marketing, Dairy, Policy

danderson@tamu.edu

Anderson, David. “Beef Cow Slaughter Ramps Up“. Southern Ag Today 2(46.2). November 8, 2022. Permalink

Wheat and other small grain grazing is an important source of demand for calves every Fall.   Fewer cattle will likely be grazing on small grain pastures this Winter due to poor plant establishment caused by drought. The January 2022 USDA-NASS Cattle report indicated 1 percent fewer cattle grazing on small grain pastures in Kansas, Oklahoma, and Texas last winter. Many producers from the Southern Plains (Kansas, Oklahoma, and Texas) have already early weaned and sold their calves due to the drought. Lower winter wheat forage production this year will reduce cattle demand from other Southern states.

Planted acres of winter wheat are expected to increase in the Southern States from last year. However, early planting conditions challenge future grazing forage production for ranchers in this area. Winter wheat planting conditions have been severely affected after three consecutive ENSO Niña periods. About 95 percent of the winter wheat area in the Southern Plains (Kansas, Oklahoma, and Texas) is still under drought (Figure 1), compared to an estimated 33 percent at the beginning of last season.

Figure 1. Winter Wheat under Drought Conditions

The planting rate in the Southern Plains States is 4.2 percent lower than the average over the last five years (Figure 2). However, the crop emergence rate is even lower than the planting rate. Kansas winter wheat has the lowest emergence rate of 40 percent (34.4 percent lower than the five-year average). Oklahoma’s emergence rate is 11.5 percent lower than average, while Texas’s is only down 4.2 percent. 

Figure 2. Winter Wheat Planted Acres and Wheat Emergence Rates

Compared to last year, some stockers were grazed in deferred summer grasses, with higher costs and at the expense of a reduced spring forage supply for their cow-calf operation. Range and pasture conditions have severely decreased compared to last year (Figure 3). In Kansas, 79 percent of Range and Pasture Condition was categorized as very poor and poor. In Oklahoma and Texas, range and pasture conditions are 58 and 30 points higher for similar categories. This alternative will not be available this year, where all forage left will likely be reserved for cows.

Figure 3. Range and Pasture Conditions

Producers will face many challenges putting weight on stockers if poor winter wheat conditions do not improve during the season. As the drought continues, the higher the risk of seeing more calves being sold underweight and earlier in the market.  It will likely mean less of a seasonal decline in heavy feeder prices in the March-May period.

Pancho Abello

Assistant Professor and Extension Specialist-Management

pancho.abello@ag.tamu.edu 

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Abello, Pancho. “Small Grain Pastures“. Southern Ag Today 2(45.2). November 1, 2022. Permalink