Category: Livestock Marketing

Livestock Risk Protection insurance (LRP) is a price insurance policy livestock producers can purchase to reduce price risk and losses, but LRP is not widely used by cattle producers. Several reasons could explain why few producers have not used LRP in the past, but the cost of LRP is a big reason. In 2019 and 2020, the LRP premium subsidy rate was increased to reduce the insurance premium cost to producers. The premium subsidy increased to 20% from 13% of the total premium cost in 2019. Then, in 2020, a tiered subsidy rate was set. Subsidy rates became 35% for coverage between 95–100%, 40% for coverage between 90–94.99%, 45% for coverage between 85–89.99%, 50% for coverage between 80–84.99%, and 55% for coverage between 70–79.99%. We recently published research analyzing the impact of the premium subsidy rate increase on feeder and fed cattle LRP costs. We found producers’ premiums for feeder cattle LRP policies were reduced between $1.41-$1.90 per cwt and $0.95-$1.56 per cwt for fed cattle LRP policies with the new subsidy rate. The figure shows the range of cost savings based on coverage level. These changes also increased the chances a LRP policy would pay an indemnity greater than the premium. In the past, indemnity payments would rarely be higher than the premium cost. These policy changes significantly reduced LRP cost, which might make LRP a more viable risk management tool for producers. 

Figure 1. Reduction in Producer Premiums for Feeder and Fed Cattle LRP policies from Recent Subsidy Rate Increases

Citation 

Boyer, C.N., and A.P. Griffith. In press. “Increasing Livestock Risk Protection Subsidies Impact on Producer Premiums” Agricultural Finance Review Available at: https://www.emerald.com/insight/content/doi/10.1108/AFR-05-2022-0066/full/html#:~:text=The%20increased%20subsidy%20in%202019,is%20lower%20to%20start%20with.

Boyer, C.N., and A.P. Griffith. In press. “Subsidy Rate Changes on Livestock Risk Protection for Feeder Cattle” Journal of Agricultural and Resource Economics Available at: https://ideas.repec.org/a/ags/jlaare/316752.html

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Boyer, Chris, and Andrew Griffith. “Livestock Risk Protection Cost is Lower“. Southern Ag Today 2(36.2). August 30, 2022. Permalink

Even as we are in the middle of the heat of summer, contract poultry growers should be concerned about fuel prices going into this winter. Propane prices have remained at a high level through the spring and into the summer. Looking ahead, evaluating the world market demand for energy and current US inventories suggests that prices could increase drastically. According to an analysis by Propane Resources LLC, a leading US propane marketing company, growers should expect a very volatile six to nine months in propane prices. Much of this will be driven by a very active European market with much instability being caused by the Ukrainian conflict, which is stifling natural gas trading. To help fill that void, sellers of liquid natural gas that would normally supply Asia are rerouting that LNG to a European market. That LNG will likely be replaced in Asia by propane. 

As supply and demand for propane becomes an even more global market, a look at the current and projected US propane inventory for 2022-23 does not give one a good feeling for the upcoming winter’s prices, or even into next spring. The current peak projected inventory for the US comes in at about 3.25 billion gals, and drops off from there, staying at or below the historical monthly minimum inventory over the last five years. This simply means that the supply of propane does not look to be ample for the next several months. For poultry growers, this means the time to secure future pricing is now. Waiting around for a mid-summer price drop will likely mean you will be paying more, not less, for your propane this winter. 

Brothers, Dennis. “Fuel Price Volatility a Growing Concern for Commercial Poultry Growers“. Southern Ag Today 2(35.2). August 23, 2022. Permalink

In the areas of the Southern U.S. that received adequate rainfall this spring and summer, grazing warm-season annual forages have remained an economically viable option for many.

A warm-season annual forage mix was planted on April 20^th containing several species (Sorghum-Sudangrass, Pearl Millet, Forage Sorghum, Cowpeas, Sunn Hemp, etc.). It received 50 pounds of nitrogen (N) fertilizer in one application after planting. Stocker steers weighing 625 lbs. began grazing on June 5^th and are expected to graze for 120 days, finishing around October 5^th. During the growing season, forage quality was tested at 65% total digestible nutrients (TDN) and 15% crude protein (CP).

The following are our expectations for our warm-season annual forage mix:

1. Forage Production: 8,000 DM lbs./acre,
2. Level of Forage Utilization: 40%
3. Production Costs: $175/acre

The table below provides a detailed view of the variables and equations used to determine the total cost of growing and grazing a warm-season annual forage mix per dry matter ton consumed. The resulting total cost of growing and grazing warm-season annual forages was $109/DM ton consumed. 

It’s important when making the comparison to other feedstuffs, such as Soyhulls (77% TDN, 13% CP, $255/ton) or Corn Gluten (80% TDN, 22% CP, $260/ton) to factor in the cost to store, mix, and feed, as well as any waste that occurs.

For those that have the resources and management to grow and graze warm-season annual forages, I don’t think there are any readily available feedstuffs that can compete. Every ranch is different. Play with the numbers and see if grazing warm-season annual forages will work for your operation.

Prevatt, Chris. “Grazing Stocker Cattle on Warm-Season Annual Forages“. Southern Ag Today 2(34.2). August 16, 2022. Permalink

The July Cattle Inventory report confirmed another year of herd liquidation. July beef cow inventory totaled 30.4 million, down 2 percent from the previous year. It also appears that very few are looking to expand their herds with replacement heifers down 3.5 percent. With the July numbers in hand, everyone’s attention will turn to the second half of 2022 and the January Cattle inventory report.

This summer, drought conditions have intensified in the Southeastern U.S., impacting forage production. According to the most recent USDA Crop Progress Report, 21% of pasture is in poor or very poor condition in the Southeast. In Arkansas, conditions are much worse, with 75% of pastures in poor or very poor condition. The Southern Plains are also in extreme drought. The USDA Crop Progress report shows that 68 percent of pasture is in poor or very poor condition.

Many producers are deciding between feeding hay now or culling cows. The auction data confirms high volumes of cull cows and bulls coming to market. The table provides July cull cow and bull auction volumes for Arkansas, Missouri, and Oklahoma. July cull cow and bull volume in Arkansas totaled 4,455 head, up 37.2 percent year over year. Volumes were 83.8 percent and 105.3 percent higher in Missouri and Oklahoma, respectively.

July Slaughter Cattle (Cows and Bulls) Auction Receipts

State	Jul-22	Jul-21	% Chg. Y/Y
Arkansas	4,455	3,246	37.2%
Missouri	15,794	8,593	83.8%
Oklahoma	12,396	6,038	105.3%

Large volumes of cull cows have pushed beef cow slaughter even higher. The graph shows cumulative beef cow slaughter for the first 29 weeks of the year. Currently, beef cow slaughter is at its highest in the last 30 years, totaling 2.21 million head. Based on the January 2022 beef cow inventory estimate, we slaughtered 7.3 percent of the herd. Based on current slaughter totals, we could see the January 2023 beef cow inventory decline at least 3 percent, the largest decline since the mid-1980s.   

Mitchell, James. “Drought is Sending More Cows to Market“. Southern Ag Today 2(33.2). August 9, 2022. Permalink

This summer’s drought is affecting a large part of the western half of the South, producing unfortunate losses for many ranchers and farmers in our area. The most affected States are Texas, Oklahoma, Arkansas, Louisiana, Mississippi, and Tennessee within the Southern Region. The last U.S. Drought Monitor reported that 92% of this area is abnormally dry, and about 64% is in severe drought.

U.S. Drought Monitor – South Region. July 26, 2022.

Unfortunately, droughts always have a negative financial and economic effect on our business. The USDA’s Pasture, Rangeland, and Forage Insurance (PRF) has shown to be an essential tool to support ranchers during these times. PRF showed a positive net benefit, indemnities over premiums, in many cases. Still, most importantly, it generated significant payments in drought years when needed most.

USDA created the Pasture, Rangeland, Forage (PRF) insurance program in 2007 as a tool for livestock and forage producers to reduce the risk of forage loss associated with lower precipitation. The program is available in 48 states and policies covered over 247 million acres in 2022. In southern states, the adoption of this program has nearly doubled since 2007. During the program’s first year, the total enrolled acres in this area was 20.8 million. Producers from these states have insured about 41 million acres for 2022.

Ranchers in Texas and Oklahoma have adopted the PRF insurance most quickly within the Southern region and are better prepared when compared to the 2011 drought. The percentage of enrolled acres of total ​​pasture and rangeland in Texas and Oklahoma is 36% and 18%, respectively. The rest of the southern states had an adoption rate between 1 and 4% over their total grassland and rangeland. Texas has 71% more acres enrolled in the PRF program than in 2011, while Oklahoma has almost 990% more.

PRF Enrolled Acres as a Percent of Total Grassland Pasture and Rangeland in Selected Southern States.

Comparison of PRF Coverage in 2011 Compared to 2022 for Selected Southern States

Abello, Francisco “Pancho”. “PRF Adoption Rate to Mitigate Drought Impact“. Southern Ag Today 2(32.2). August 2, 2022. Permalink