Category: Livestock Marketing

Prices at the grocery store are higher for nearly everything, but one staple food item, in particular, is likely a key driver of recent sticker shock for consumers. Egg prices during the holiday season were up more than double over the same period in 2021. Retail egg prices averaged $4.25 per dozen in December 2022, a record high. This compares to $1.79 per dozen in December 2021.

The main culprit of the higher prices is a supply disruption at a time when consumers have a strong demand for eggs. Highly Pathogenic Avian Influenza (HPAI), often called the bird flu, is an important concern each year, but was especially problematic in the U.S. during 2022. USDA reports that HPAI was detected in 307 commercial flocks in 2022. HPAI is very contagious between birds, so strict containment protocols including depopulation of infected flocks are used to prevent additional spread to other flocks. 

USDA estimates that approximately 57 million birds in the U.S. were affected by HPAI in 2022. Of this total, nearly 40 million were egg laying hens lost to HPAI between February and December 2022. There were 320 to 335 million hens laying eggs each month in 2021 but that total has been in the 299 to 310 million hen range between April to October 2022. Fewer laying hens has led to fewer eggs produced and tighter supplies for eggs consumers.  Egg production has trended down over the last couple of years due to high feed costs, rising other production costs, and the turmoil of the pandemic on profits.

On the demand side, the holiday season is peak season for egg consumption. According to the first weekly USDA “Egg Markets Overview” of 2023, an estimated 11.4 eggs during the Thanksgiving holiday and 8.6 eggs during Christmas were used per household. The Christmas estimate is 1.6 eggs higher than Christmas 2021. Even at high prices, U.S. consumers still purchased a lot of eggs over the holidays. Strong demand at a time when supplies are tighter drove egg prices higher.  

The good news is that egg prices are expected to moderate in the months ahead. Consumer demand for eggs will not be at holiday levels, except for Easter egg hunts, and egg producers will continue to try to recover from the supply disruptions. HPAI concerns will continue into 2023 and future impacts could affect supplies this year, too. But current USDA forecasts are for 2023 egg prices to fall back to more normal levels as the supply and demand balance improves.    

Author: Josh Maples

Assistant Professor, Livestock, Production Economics, Commodity Marketing

Mississippi State University

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Maples, Josh. “Record Egg Prices Driven by Supply Disruptions.” Southern Ag Today 3(5.2). January 31, 2023. Permalink

Image credit to Julia Filrovska

I think the most interesting number in USDA’s latest Cattle on Feed report (released Friday January 20^th) was the quarterly number of heifers on feed.  The report indicated 4.65 million heifers were on feed on January 1, down 25,000 head from January 1, 2022.  The quarterly data breaks out the number of heifers and steers on feed and is released in January, April, July, and October.  When comparing to the same quarter of the prior year, it was the first quarter since July 1, 2021 that registered a decline in the number of heifers in feedlots.  That slightly fewer heifers are on feed than last year does not indicate a movement toward herd rebuilding, but it may indicate that there are fewer heifers to place as total cattle numbers decline.  Compared to January 1, 2022, steers on feed were down 4.5 percent compared to the 0.5 percent decline in heifers.  

Of the total cattle inventory on feed, 39.8 percent were heifers, the largest percentage since 2001.  Heifers as a percent of cattle on feed exceeded 40 percent in 2000 and 2001 which was another period of cow herd contraction.  This quarterly data began in 1996.

The headline numbers were not much different than expected.  Marketings were down 6.1 percent, placements down 8 percent, and total cattle on feed were down 2.9 percent.  

Author: David Anderson

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

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Anderson, David. “The Interesting Part of the Cattle on Feed Report.” Southern Ag Today 3(4.2). January 24, 2023. Permalink

Friday brings USDA’s first cattle on feed report of the year and will lead us to the cattle inventory report to be released on January 31^st.  This article takes a look at some expectations for the cattle on feed report.

All three categories, December marketings, placements, and the January 1 number of cattle on feed are expected to be smaller than last year.  Feedlot marketings are expected to be about 5.5 percent smaller than last year.  Marketings are highly influenced by the number of slaughter days in the month.  Slaughter days are the number of days in the month minus holidays and weekend days.  December 2022 had the same number of days, 21, as December 2021.  That implies a lower daily rate of marketings.  It’s likely that they were reduced by some winter storms and falling packer margins.

Feedlot placements, or the number of cattle placed into feedlots, in December is expected to be about 10 percent smaller than last December.  Several sets of data are relevant to the number of cattle going on feed. USDA reports weekly data on feeder receipts, or sales, at auction markets, internet and video sales, and direct sales.  It is not a complete accounting of all sales each week.  It was 36 percent smaller than December 2021.  The number of feeder cattle reported on the CME index was about 10.5 percent smaller than December 2021.  About the same number of feeder cattle were imported from Mexico as last year.

Fewer cattle marketings and placements leaves about 3.5 percent fewer cattle on feed to start this year compared to last year.  Fewer cattle on feed would continue the trend of shrinking numbers.  It will lead to less beef production and likely higher cattle prices this year.  One of the interesting numbers to look at in this report will be the estimate of the number of heifers on feed as of January 1.  Heifers have been a growing percent of all cattle on feed as the cow herd has been reduced.  

Author: David Anderson

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

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Anderson, David. “Fewer Cattle on Feed Expected.” Southern Ag Today 3(3.2). January 17, 2023. Permalink

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