Category: Livestock Marketing

The average of various ENSO (El Niño and the Southern Oscillation) models suggest a trend out of La Niña conditions and toward neutral conditions through the spring and into El Niño territory by the May-June-July quarter. Where La Niña typically brings drought to the Southern Plains and other parts of the South, neutral to El Niño conditions are associated with average and above average rainfall. The combination of increasing calf values and the potential for improved rainfall through the summer has some ranchers considering restocking strategies from drought-induced culling. 

We’re still very early in the decision-making process of whether to grow a herd and in some cases, there may not be replacement cows available that naturally fit your environment. However, it’s worth beginning to think about what cows are a financial fit for your operation so that you can take advantage of opportunities and avoid overpriced replacements when the market takes off. 

Let’s take a look at various replacements offered around Texas in the month of December. Using Texas A&M AgriLife Extension’s Cow Bid Price estimator, forecast of price, and forecasts of expected cow costs for the area we’ve estimated Net Present Value (NPV) of the investment in these replacements and what a rough break-even bid would be. 

We can see several trends in the data. First, the ratio of number of calves produced by the cow to price paid for the cow is a critical component. The Table below looks at 2 cows that differ by stage of pregnancy, weight, purchase price, and number of calves expected to produce over her remaining life.  The number of calves to produce in her expected life is key, but don’t forget her value as a cull cow.  Often the cull cow value is a major part of the cow’s income producing life.  It’s also important to note that though the last cow on the list is the cheapest, in this case, she represents a negative NPV. However, were she roughly $100 less expensive she would net a profit in the next year and likely generate additional cash flow as a cull. 

There are thousands of combinations and considerations when making the decision to restock a herd. The key is to use your data to evaluate your own business. There is the potential that the $1,100 cow is a steal, but in other cases, she could steal from you, and if we return to the $3,000 replacement market the need to run the numbers will become all the more important. 

Author: Justin Benavidez

Assistant Professor and Extension Economist

justin.benavidez@ag.tamu.edu

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Benavidez, Justin. “A Very (Very) Early Look at Post-Drought Herd Rebuilding.” Southern Ag Today 3(2.2). January 10, 2023. Permalink

Looks like we’re starting the new year where we left off the last one: with beef cow slaughter.  But, this time with some good news.  Beef cow slaughter for the last two reported weeks, to date, in December were smaller than the same weeks the year before.  For the first time in 2022, weekly beef cow slaughter declined.  These weeks were the first year-over-year decline since July 2021.

Weekly beef cow slaughter for the weeks ending December 10th and 17th totaled 75,900 and 76,900, respectively.  Weekly beef cow culling during the same weeks of 2021 totaled 79,800 head.  Cow slaughter in the South has been a little below last year during most weeks since October.  In Region 6, which includes Texas, Arkansas, and Louisiana slaughter was only below last year for the week ending December 10^th. 

Some of the decline is seasonal.  Beef cow slaughter tends to drop off in December after the highs of October and November.  The fact that slaughter has been so large in 2022 may also contribute to some decline.  Some winter weather might have also contributed to a bit lower slaughter.  Beef cow slaughter often picks up briefly in January after the rush of the holidays and also after the 1^st to get to the next calendar/tax year.  In the coming weeks, watch to see if cow culling is below that of early 2022.  Reduced culling will be needed to begin to slow cattle herd shrinking, but it’s likely too early to see any evidence of that.

Author: David Anderson

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

danderson@tamu.edu

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Anderson, David . “Smaller Weekly Beef Cow Culling, Finally.” Southern Ag Today 3(1.2). January 3, 2023. Permalink

USDA released a flurry of livestock related reports last week leading up to Christmas including Cattle on Feed, Hogs, and Pigs, Milk Production, and Cold Storage.  Each of them has something of interest for livestock markets in the new year.

Pork bellies hit 54 million pounds in cold storage facilities around the country.  That is not a record large amount but, it is more than double the stock supplies in November last year.  About 28 percent fewer hams were in storage.  Bellies have been the poster child for market volatility in recent years.  The combination of abundant stocks and reduced hog production should continue that volatility.  Beef storage was up 6 percent compared to a year ago.  That’s not much considering the large amount of beef produced this year.

The combination of more cows and more milk per cow produced 1.3 percent more milk than in November last year.  In the Southern states that are reported monthly, Georgia and Texas increased milk production by 13 and 6 percent, respectively.  Florida and Virginia reported less milk production than a year ago, 11 and 3 percent, respectively.

The Hogs and Pigs and Cattle on Feed reports were released Friday afternoon.  The Hogs and Pigs report indicated slightly more breeding hogs (28,800) than a year ago on December 1.  Growth in other states offset the 50,000 head decline in Utah due to previously announced production cutbacks attributed to California’s proposition 12.  After small increases, the number of sows in states across the South more than offset a 10,000 sow decline in North Carolina.  Some growth in sow numbers should translate to small growth in pork production by later in 2023.  

The Cattle on Feed report indicated 2.6 percent fewer cattle in feedlots than last December 1^st.  November placements were down 2 percent compared to last year, for the 3^rd month in a row of smaller placements. August 2022 will turn out to be the largest month for placements this year.  The number in feedlots will continue to decline in 2023 reflecting the smaller cow herd.  The tightening in supplies will bring some higher calf and cattle prices in the new year, of course depending on feed costs and beef demand.

The year-end brought a number of interesting livestock reports with some implications for 2023.  All of us livestock economists at Southern Ag Today wish you a happy and prosperous new year!

Author: David Anderson

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

danderson@tamu.edu

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Anderson, David. “Fewer COF and Hogs, But More Milk.” Southern Ag Today 2(53.2). December 27, 2022. Permalink

Retail meat prices have increased to record high levels over the last year and a half, like many other items.  But, unlike other goods, beef, pork, and chicken prices have some unique market characteristics affecting their prices.  This SAT article examines retail beef, pork, and chicken prices that are part of the monthly Consumer Price Index (CPI).  

Retail pork prices really began to increase in March 2021.  Since then pork prices have increased from $4.17 per pound to $5.05 in October 2022.  The latest CPI report, issued last week, reported retail pork prices in November at $4.95 per pound.  For the first time this year, the retail price was below the prior month.  The average pork price remains above last year, however.  High feed costs, disease issues, and a lack of hog producer profits have kept pork production below a year ago.  Wholesale prices, as measured by the pork cutout value have, generally, been below 2021 most of the year.    

Retail chicken prices have declined for the last 2 months since hitting a high of $1.89 in September. November’s average price was $1.84 per pound well above the $1.58 of last November and the 5-year average November price of $1.50.  High wholesale chicken cut prices led to increased production earlier this year and now wholesale prices are at or below the five-year average.  

Like pork prices, retail average Choice beef prices began to increase in March 2021.  They increased from $6.48 in March to a record $7.90 in October 2021.  Since then, retail Choice beef prices have been flat to slowly declining, falling to $7.37 in November.  In contrast to pork and chicken, beef prices have been lower than last year since August.  Drought has forced herd culling which has kept beef production higher than in 2021.  The Choice boxed beef cutout has been lower than in 2021 most of the year.  

Monthly average retail meat prices have been slow to respond to lower wholesale prices this year.  Several months of declining beef prices have made beef relatively less expensive than other meats.  Falling wholesale prices will allow some room for retail prices to decline further in 2023.  The effect of higher interest rates and tightening budgets for many consumers may change consumer purchasing patterns and allow for further retail price declines in the new year.  

Merry Christmas from all of us livestock economists at Southern Ag Today! 

Author: David Anderson

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

danderson@tamu.edu

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Anderson, David . “Retail Meat Prices Finally Decline.” Southern Ag Today 2(52.2). December 20, 2022. Permalink

The cattle feeding industry has experienced large increases in feeding efficiency over time.  In this case, efficiency means fewer pounds of feed to produce the same or more amount of beef, pounds of feed per pound of gain.  Not only has efficiency increased, long term, but fed cattle finished weights have increased also.  Greater efficiency in feed use is one way to offset higher feed costs.  

The Kansas State University Focus on Feedlots is a long running survey (since 1990) of a few feedlots that includes data on in-weights and out-weights, days on feed, average daily gains, and pounds of feed per pound of gain.  The data is also divided by steers and heifers.  

In 1990, 6.51 pounds of feed were fed to get 1 pound of gain.  So far in 2022, 6.16 pounds of feed fed have produced a pound of gain.  That represents a 5.3 percent decline in feed needed to get a pound of live weight.  Examining 5-year averages, feed per pound of gain average 5.99 over the 2011-2016 period.  Feed per pound of gain has increased in recent years but, finished weights have continued to increase.  It does take more feed to get those last few pounds on each animal.  In this dataset, steer finished weights have increased from 1187 pounds to 1429 pounds, a 20.4 percent increase.  Similar to steers, feed per pound of gain for heifers has declined 3.7 percent since 1990, from 6.75 pounds of feed to 6.49 pounds.  

Feed per pound of gain exhibits significant seasonality, with the most feed needed in the February-March period.  That may make some sense given winter feeding conditions and the animal using more feed to keep warm rather than gain weight.  The least amount of feed to get a pound of gain tends to occur in September. 

Increasing feed efficiency is another area of improvement in beef production over the last few decades. Efficiency increases are allowing feeder cattle and calf prices to not decline in response to high feed costs as much as they might have in the past.

Author: David Anderson

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

danderson@tamu.edu

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Anderson, David. “Feeding Efficiency Gains Over Time.” Southern Ag Today 2(51.2). December 13, 2022. Permalink