Category: Livestock Marketing

Dairy cow culling has increased this year due to low milk prices causing unprofitable conditions for many dairies.  In fact, milk supplies in excess of processing ability has caused some milk to be dumped out instead of being used in some regions of the country.

Total dairy cow slaughter in the U.S. is up 5.5 percent (81,300 head) compared to last year.  Culling is higher in the big milk production regions of the country, including the Midwest (region 5) and the West Coast (regions 9 and 10) which are up 3.4, and 10.3 and 5.4 percent, respectively.  

Three regions concern Southern dairy producers, regions 3, 4, and 6.  Region 3 includes Virginia and Maryland but, those states are likely swamped in the data by Pennsylvania, one of the largest milk producing states in the country.  Dairy cow slaughter for region 3 also likely includes a lot of cows from New York, another large milk producer.  Region 4 runs from Mississippi in the West to Kentucky, the Carolinas, and down to Florida.  Region 6 includes Texas, Arkansas, and Louisiana.  New Mexico is a large producer and is also part of region 6.  Slaughter in region 3 is actually 7 percent below last year.  Region 4 is about even with a year ago given that slaughter is only 600 head more than last year.  The big change is in region 6 where dairy cow slaughter is up 24.6 percent, or 42,800 head, over last year.  That represents more than half of the increase in total U.S. dairy cow slaughter this year.  

High cull cow prices are likely adding a little encouragement to dairy cow culling.  But low milk prices are the driving factor.  We are likely to see larger culling than a year ago until milk prices show some improvement.  Dairy cow slaughter tends to decrease seasonally until this time of the year then begins to increase.  Increasing numbers of dairy cows going to market in coming weeks and months would not be a surprise.

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Anderson, David. “More Dairy Cow Culling.” Southern Ag Today 3(28.2). July 11, 2023. Permalink

I hope you all have a great holiday, celebrating our country’s independence.  I suspect a bunch of us will spend some time out tending a grill or smoker for a bit this week.  With that in mind today’s article looks at retail and wholesale meat prices.

Retail meat prices for beef, pork, and chicken, reported monthly by the Bureau of Labor Statistics and USDA, have been moving in different directions.  Retail pork prices were below a year ago while chicken and beef prices were above a year ago.  Each market is responding to their own supply and demand issues which are causing prices to move in opposite directions.  But, all share the issues of higher production costs including those to get the products from where they are produced to your local meat case.

Choice beef prices hit a record high of $8.08 per pound in May (the latest data), surpassing the $7.90 per pound in October 2021.  The all-fresh beef price data series was just a couple of cents per pound off its record high.  Tighter beef supplies, down 4.8 percent compared to a year ago, coupled with continued consumer buying is pushing prices higher.  Fewer cows going to market and fewer fed cattle have led to higher ground beef prices.  The start of summer grilling season provides a little demand boost too.

The retail pork price was $4.73 per pound in May.  That was 3.2 percent below last year and unchanged from the month before.  Pork production for the year is 0.3 percent more than last year.  In the wholesale pork market, prices for cuts like loins, bellies, and ribs have languished this year, in part, due to a little more production but, also due to some apparent demand problems.  Wholesale pork cut prices have started to increase in the last couple of weeks and that will likely bring pressure for higher retail prices if the consumer demand is there.

Chicken (broiler) production is 1.5 percent larger than last year, so far.  The reported monthly retail price was $2.45 per pound, just slightly above last year’s $2.42 per pound.  Wholesale chicken cut prices have been well below last year’s level most of the year.  Boneless, skinless breasts were $1.29 per pound compared to $3.02 at this time last year.  Wings were $0.88 per pound versus $1.82 last year.  USDA’s weekly featuring report indicated a few more grocery stores with retail features and specials on chicken prices this week and lower prices than year ago on breasts and wings.

Regardless of your grilling choices this holiday, I hope you have a great holiday celebration!  Happy Fourth!

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Anderson, David. “Hot Dog! It’s Fourth of July!” Southern Ag Today 3(27.2). July 4, 2023. Permalink

The latest Cattle on Feed report was released on Friday by USDA-NASS. June 1 total cattle on feed for feedlots with capacity of 1,000 or more head was estimated at 11.55 million head which was 2.9 percent below June 1, 2022. This marked the ninth consecutive month that total cattle on feed was lower than the same month of the previous year. 

The biggest surprise from this report was the larger than expected placements of cattle into feedlots during May which were estimated at 1.96 million head. Placements were 4.6 percent (86,000 head) above May 2022 totals which was above the pre-report average expectation of a 1.7 percent increase. This was the largest May placements total since 2020. 

Placements were higher across all weight classes except for the 900-999 pound group which was down 2.3 percent. Placements of cattle weighing less than 600 pounds were up 4.1 percent, 600-699 pounds up 9.3 percent, 700-799 pounds up 3.2 percent, 800-899 pounds up 6.5 percent, and over 1,000 pounds up 6.7 percent. 

Looking at regional placements, most of the overall increase was driven by Nebraska where placements were 13.9 percent higher than last May, and placements were up double digits in all weight categories. Drought almost certainly was a factor in the larger Nebraska placements. Placements in Texas were interesting because of the contrast between light and heavy weight placements. Texas placements of under 600 pound cattle were up 7.1 percent (10,000 head) while placements over 800 pounds were down 8.7 percent (10,000 head) as compared to May 2022.

Cattle marketings were reported at 1.95 million head which is 1.8 percent above a year ago. This was slightly higher than expected pre-report but within the range of expectations. 

Looking ahead, it will be interesting to watch where cattle on feed numbers go during the summer months. Cattle on feed numbers typically decline in the summer and reach their seasonal low point around August before beginning to expand again for the Fall. Just how low that low-point is this year, and the percentage of heifers, will be informative for discussions on cattle and beef supplies. 

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Maples, Josh. “Surprisingly Big Placements in the June Cattle on Feed Report.” Southern Ag Today 3(26.2). June 27, 2023. Permalink

In our recent  Southern Ag Today article, Uptick in Livestock for Feeder Cattle, we showed that Livestock Risk Protection (LRP) purchased for feeder cattle has increased starting in 2021. LRP, an insurance policy that cattle producers can purchase daily to insure a minimum price level for a certain period, is also available for fed cattle (cattle greater than 1,000 pounds). One of the reasons why LRP was developed was to provide producers who do not sell 50,000 pounds of cattle at one time, which is a futures and option contract increment, an opportunity to hedge cattle. Fed cattle, however, are typically grouped and sold in larger loads, which better suits them to use futures and options to hedge cattle. The 2019 and 2020 increase in the premium subsidy rate for LRP did lower the cost of LRP to producers (Boyer and Griffith 2023a,2023b) and did appear to influence producers to purchase more fed cattle LRP contracts. In 2021 and 2022, the number of head and contracts sold has increased nearly four times (as opposed to the tripling in feeder cattle policies). Thus far in 2023, there has been a record number of LRP contracts sold and head insured. Similar to the feeder cattle contracts, the number of fed cattle insured with LRP is still relatively small compared to the number of eligible cattle. However, this policy tool seems to be growing in use and with increasing fed cattle prices, it will be interesting to see how many policies are purchased through the rest of the year.  

References

Boyer, C.N., and A.P. Griffith. 2023a. “Subsidy Rate Changes on Livestock Risk Protection for Feeder Cattle” Journal of Agricultural and Resource Economics 48(1):31-45. (Link)

Boyer, C.N., and A.P. Griffith. 2023b. “Increasing Livestock Risk Protection Subsidies Impact on Producer Premiums” Agricultural Finance Review 83(2):201-210. (Link)

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Boyer, Chris, Charley Martinez, Eunchun Park, Andrew P. Griffith, and Karen L. DeLong. “Uptick in Livestock Risk Protection for Fed Cattle.” Southern Ag Today 3(25.2). June 20, 2023. Permalink