Category: Livestock Marketing

Fed cattle prices surged into record territory last week, with the daily average 5 market live fed steers hitting $175.87 on April 7^th.  Daily average fed steer prices last reached the $170s in late 2014 and early 2015, with a high of $172.08 on November 26^th, 2014.  Steer prices have, generally, been increasing since the beginning of the year, with a couple weeks of dips in mid-January and mid-March.  

The calf market surged along with it.  Georgia, 7-800 pound feeder steers began the year at $156 per cwt and finished last week at $176.  The same weight steers in the Southern Plains have advanced from $184 in January to $193 last week.  Lighter weight, 4-500 pound steers in Georgia and the Southern Plains averaged $240 and $247 last week, respectively.  

Packers have continued to demand cattle as supplies have tightened.  Beef demand appears to continue to be good.  While wholesale prices for steak cuts like ribeyes and loin strips have declined over the last couple of weeks, 90 and 50 percent lean boneless beef and cuts like briskets have increased.  Higher fed cattle prices have pulled calf and feeders higher.  Lower feed prices are also boosting feeder cattle prices.  

The big unknown in the market is beef demand over the course of the year.  The effect of federal reserve action to slow the economy to fight inflation is yet to be fully felt.  Will a broader segment of consumers buy less beef in response to tightening incomes?  Can retail beef prices increase to reflect record live animal prices or will margins absorb the higher live prices?  So far, packer margins have shrunk absorbing higher live prices.  Regardless of those questions and answers, beef supplies will continue to tighten.  High calf and feeder prices may provide some opportunities for cattle ranchers to grab some profits.  

Tomorrow’s SAT will look at futures market prices and some ways to protect these higher prices now for this Fall.

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Anderson, David. “Cattle Prices in Record Territory.” Southern Ag Today 3(15.2). April 11, 2023. Permalink

Many meat items have holiday driven or seasonal peaks in demand.  For example, turkeys at Thanksgiving, chicken wings and the Super Bowl, hamburgers in grilling season, and lamb at Spring religious holidays. Christians, Jews, and Muslims have holidays where lamb may feature and we are now in the midst of those Spring holidays.

Live lamb prices hit record highs in 2021 and early 2022 due to relatively tight supplies and the continued strong demand due to people trying new food items during the pandemic.  As consumers returned to their normal habits following the pandemic and budgets tightened due to inflation, lamb demand contracted and prices collapsed.  More lamb supplies are also pressuring lamb prices lower this year.  Of course, imported lamb plays a large role in lamb supplies.

Average light weight 60-70 pound lambs in San Angelo, TX (the largest lamb auction market in the U.S.) averaged $230-$240 per cwt last week compared to $340-$350 per cwt last year.  These are light weight lambs heading to a meat packer.  Prices typically peak a couple of weeks before Easter and then decline as the holiday demand passes.  Currently, It looks like prices have already hit their seasonal peak.  

Wholesale lamb prices have declined along with live lamb prices.  Lamb leg prices were $4.10 per pound last week compared to $5.87 at this time last year.  Wholesale rack of lamb is about $2.00 pound cheaper than last year at $11.52.  Lower retail prices have begun to show up in special features at grocery stores. 

Over the last two decades, an important shift has occurred in lamb markets.  A “non-traditional” market has emerged driven by growing ethnic markets, direct sales to consumers, and some direct to restaurant trade.  Hair sheep breeds replacing wool breeds have aided some of this change.  Hair sheep breeds are allowing producers in the South to enter this market again.  Statistics on sheep numbers for most Southern states were discontinued back in the 1970s as fewer and fewer sheep were in the South.  It appears that growing non-traditional markets are providing some opportunities for farmers in the South.  

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Anderson, David. “‘Tis the Season for Lamb.” Southern Ag Today 3(14.2). April 2, 2023. Permalink

Spring weather in the southeast can indeed be a mixed bag. Environmental control systems are strained as poultry growers in the southeastern United States can easily see temperature swings approaching 60 degrees Fahrenheit over 48 hours. While most modern houses today are capable of successfully handling such temperature swings and keeping the birds inside comfortable, the growers themselves feel the strain in the form of utility costs. Historically, the two largest variable costs contract growers must contend with are heating fuel used to keep birds warm and electricity used to keep birds cool. Luckily, falling propane and natural gas prices accompanied the latest cold snap. A relatively mild winter across the US and Europe facilitated this, leading to decreased usage. The results are increasing stocks of propane in the US starting in November ’22 up to the beginning of March ’23 (Fig 1). Increased supply has led to falling prices for propane. Comparing the previous year’s weak supply numbers to the current strong supply situation could indicate that the upcoming winter may also be met with lower heating fuel prices. This is good news for growers heating chicken houses in the U.S. this spring. This could of course change quickly if the winter of ’23 shapes up to be harsh, or if the crude oil prices again rise to higher levels (as propane is closely tied to crude oil production and price.) Even so, going into next winter with a strong supply of propane is a good sign for poultry growers. Natural gas supplies are also predicted to be higher and long-term prices NG are predicted to be down accordingly. 

Alternatively, electricity costs are not looking as promising going into the summer when most electricity is used on poultry farms. As poultry houses have become better insulated and better managed to control heating costs, electricity has become the most prevalent cost factor for many growers. Electricity prices saw a significant 10% increase in 2022. While the projection for 2023 is lower at 2.5%, the long-term pricing trend is upward (Fig 2). The causes of this continued increase are varied, from general inflationary forces, increasing demand for electricity met with the increased cost of new generation facilities, to the increased cost for utility companies to implement carbon neutral generation goals. This makes it imperative for growers not only to focus on housing and equipment for heating purposes but also focus on electrical energy usage efficiency. While any money spent on energy efficient upgrades to equipment must be analyzed closely looking at initial cost versus payback over time, electrical efficiency upgrades look to be becoming more and more important going forward. 

Figure 1.

Figure 2.

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Brothers, Dennis. “Heating Fuel and Electricity Concerns for Commercial Poultry.” Southern Ag Today 3(13.2). March 28, 2023. Permalink

There are a lot of interesting things going on in livestock markets as we start Spring (at least by the calendar, if not the temperature).  Calf prices are sharply higher, corn prices are down a little, and hog prices and beef exports are struggling.  But, this week we’ll look at beef cow slaughter which is down sharply from earlier this year and compared to a year ago.

From the first week of the year through the first week of March 621,900 beef cows have gone to packers.  That is 53,300 head fewer (down 7.9 percent) than the same period last year.  The 63,000 head sent to slaughter for the week ending March 4^th was the smallest non-holiday week beef cattle slaughter since early April 2021. 

Beef cow slaughter data is reported by USDA with states aggregated into regions.  Most Southern states are in Regions 4 and 6.  Region 4 includes the deep South from Mississippi to North Carolina and up to Kentucky.  Beef cow slaughter this year in region 4 is down 7.4 percent from last year.  Region 6 culling, which includes Texas, Arkansas, and Louisiana, is 10.1 percent smaller than last year.  It looks like culling in both regions has slowed even more over the last couple weeks.  One notable region is showing an increase in beef cow slaughter.  Region 7 includes Iowa, Kansas, Missouri, and Nebraska and slaughter is up 3.4 percent over last year.  Drought remains severe in Kansas and Nebraska according to the drought monitor.

It is worth noting that beef cow slaughter normally declines seasonally a little from January into March and April.  This decline in slaughter this Spring is larger than normal.  

Most everyone who follows the cattle market knows that large numbers of beef cows were sent to market in 2022 due to drought and low calf prices relative to costs.  One of the interesting questions for 2023 is whether cow culling slows down.  The answer, so far, appears to be “yes.”  

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Anderson, David. “Beef Cow Culling Sharply Lower.” Southern Ag Today 3(12.2). March 21, 2023. Permalink

Last summer, I wrote a Southern Ag Today article about the strength of dairy prices. After a great deal of volatility during 2020 and 2021, prices for cheese, butter, and nonfat dry milk pushed farm level milk prices beyond what was seen in 2014. The US All Milk price actually exceeded $27 per cwt last April and May and just missed that level in June. Increases in feed cost definitely bit into those price levels, but margins were as attractive as they had been in several years. Since that time, milk price has fallen by about $4 per cwt. Feed costs have also decreased, but not by as much proportionally. The figure below shows both US All Milk Price and Dairy Margin Coverage (DMC) feed costs since January of 2014. (Note: Dairy-DMC did not exist for this entire time period, but the chart was intended to give historical perspective).

US All Milk Price and DMC Feed Cost

January 2014 to January 2023, $ per cwt

The last data point in the chart above is for January of 2023 and that is where I want to focus this discussion. Dairy margins have shifted in recent months such that the DMC margin for January of this year was $7.94, so payments will be made at the $9.50 coverage level. This is the highest level of coverage available to producers covering up to 5 million pounds of annual milk production history. This means that a payment of $1.56 will be made on one-twelfth of the year’s covered production. The January payment alone will cover over 80% of the total premium cost for 2023 and coverage is still in place for the remaining 11 months for which margins are not yet known.

The figure below shows the DMC Margin from January 2014 to January 2023. This is just the difference in the two series shown in the previous graph and tells the story very well. One can see the $2.96 decrease in margin from November of 2022 to January 2023 as well as the overall volatility in milk price over DMC feed costs had the program been in existence since 2014. Had DMC been around in 2009 and 2012, the margin would have been below $4 at times.

DMC is similar to many other risk management tools in that producers are typically better off if they don’t receive payments from it. Ideally, market conditions are such that the difference between milk price and feed costs allow for acceptable returns. But in times when that is not the case, DMC can provide solid risk protection. Dairy producers should consider all risk management opportunities available to them including Dairy Revenue Protection, Livestock Gross Margin for Dairy, forward contracts, futures and options. But because DMC is a relatively inexpensive form of margin protection on coverage up to 5 million lbs of production history, I typically view it as the first layer of risk protection in a dairy farm’s risk management plan.

DMC Margin – US All Milk Price Minus DMC Feed Cost

January 2014 to January 2023, $ per cwt

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Burdine, Kenny. “Dairy Margin Coverage Program Begins 2023 with Payment.” Southern Ag Today 3(11.2). March 14, 2023. Permalink