Livestock Marketing

Dairy cow slaughter rebounded sharply in the two weeks after the holiday shortened fourth of July week.  It’s pretty normal for dairy cow slaughter to climb seasonally after early July but, the magnitude of this weekly increase is larger than usual.  Even with the rebound in culling, weekly slaughter remained smaller than last year and the average of the last 5 years.  The trend of smaller dairy cow culling is likely to continue the rest of the year, even though culling may increase seasonally.  

Over the last 8 weeks dairy cow culling is 18 percent smaller compared to the same time period last year.  Dairy cow slaughter is reported by region.  Region 4 (Southeastern states), region 6 (Texas, Arkansas, and Louisiana), and region 3 (Virginia and Pennsylvania) include Southern states.  Dairy cow slaughter in regions 3 and 4 are down 10 percent and 8 percent, respectively.  Slaughter in region 6 is down 32 percent.  Regional differences in slaughter rates continue to indicate shifts in regional milk production with faster than average culling rates in the South but slower culling in the Southern Plains.  On an interesting note, region 8, which includes Colorado and the Dakotas, has reported larger dairy cow slaughter this year than last year and is the only region to do so.  Dairy cow culling is likely to remain relatively low in coming months due to fewer dairy cows in total, relatively few replacement heifers, and rising milk prices.

The overall decline in dairy cow slaughter is further supporting cull cow prices across the South and the country.  Dairy cow slaughter has made up, on average, about 48.6 percent of all cow slaughter over the last decade.  This year dairy cow slaughter represents 48.3 percent of all cow slaughter.  Reduced dairy cow culling coinciding with reduced beef cow slaughter is further cutting supplies of lean beef.  Wholesale boneless 90 percent lean beef hit a new high of $3.76 per pound last week.  The cow-beef cutout is in record territory at over $290 per cwt.  Lean slaughter cows at auction continue to hover around $125 per cwt.  The lack of dairy replacements and need for replacements by some has bred dairy cow and heifer prices up from $300 to $600 per head in Kentucky dairy auctions.  

Overall, reduced dairy cow culling is supporting cull cow prices.  Reduced total cow culling is putting additional strain on cow packing plants across the region.   

Anderson, David. “Dairy Cow Slaughter Posts Strong Rebound.” Southern Ag Today 4(32.2). August 6, 2024. Permalink

Drought gripped the Southeast U.S. starting in June and has continued into July. More than 60 percent of the Southeast (AL, FL, GA, NC, SC, and VA) is experiencing drought. These drought conditions have hurt pasture and rangeland conditions in the Southeast. According to the USDA in mid-July, about 30 percent of the pasture in the Southeast (AL, AR, FL, GA, KY, LA, MS, NC, SC, TN, VA, WV) are in poor or very poor condition. Some drought conditions persist in other areas of the South, as well, including approximately half of Texas, 60 percent of Oklahoma, and 70 percent of Tennessee.

Figure 1: Drought Conditions in the South

Should these drought conditions persist, producers will have several decisions to make related to feeding alternatives, forage management, marketing, and other areas. These decisions have implications for a host of different producer outcomes. Economics calls on producers to assess each decision along the following lines: How do revenues and costs change with each decision? This is the essence of a partial budget. A partial budget assesses the change in revenue and the change in costs associated with a change in practice. If changing practices increases net returns, you should change your practice. If not, continue with your baseline practice.Drought creates some uncertainty to the price outlook for this fall. If drought incentivizes producers to bring more calves to market compared to normal, while still remaining high compared to recent history, calf prices may see a more pronounced seasonal dip this fall. 

Drought creates some uncertainty to the price outlook for this fall. If drought incentivizes producers to bring more calves to market compared to normal, while still remaining high compared to recent history, calf prices may see a more pronounced seasonal dip this fall. Timing may play a role, too. If calves are sold early, the fall low may be more spread out over time and not as deep. Lastly, if the weather improves, any expectations of more cattle this fall may evaporate pushing prices higher than expected. The next several weeks will be important in assessing where cattle markets will be in the months ahead.

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Secor, William. “Cattle and Drought in the South and Southeast.” Southern Ag Today 4(31.2). July 30, 2024. Permalink

USDA’s July Cattle on Feed report was released on Friday July 19^th. These monthly reports estimate inventory in US feedlots with one-time capacity exceeding 1,000 head, which represent more than 80% of total on-feed inventory in the United States. The July report is also a quarterly report that includes data on the steer-heifer mix in feedlots. This brief article will walk through last week’s report and some of the implications of it.

Total on-feed inventory declined during the month of June with July 1 inventory estimated at just over 11.2 million head. This trend is normal as on-feed numbers tend to decline seasonally from winter to late summer. Compared to 2023, July 2024 inventory was actually about 0.5% higher. On the surface this seems odd given the recent declines in the size of calf crops, but I maintain that cheap feed and higher slaughter weights are largely the reason for this as cattle are being fed longer.

Feedlot placements have been the most interesting number to watch in recent months. For the month of June, placements were down almost 7% from last year. This contrasts with placements being 4% higher year-over-year for the month of May. These last two months illustrate why it is sometimes hard to look at things purely on a monthly basis. If I instead calculate feedlot placements for the first 6 months of 2024, as compared to the first 6 months of 2023, total placements have been down by 3.2%. This likely tells the feeder cattle supply story a bit better.

Since USDA will not be publishing a July Cattle Inventory report this year, the July steer-heifer mix on feed is especially important as it provides some perspective on heifer retention. Heifers accounted for 39.6% of on-feed inventory in July, which was actually higher than the previous estimate from April. If retention were occurring, one would expect the heifer percentage to be in the low-mid 30% range, so this continues to suggest that expansion is not on the near horizon.

Burdine, Kenny. “Growing On-feed Inventory, Lower Placements, and No Sign of Heifer Retention.” Southern Ag Today 4(30.2). July 23, 2024. Permalink

Nestled down in the bowels of the Consumer Price Index (CPI) data that is released each month is the retail price of beef, pork, and chicken.  Each have reached record highs at some point in the last couple of years adding to overall food price inflation.  The latest CPI data for meats indicated some stabilization or decline in meat prices.  

First off, it’s worth remembering what this data represents.  It is the price of various cuts of beef, pork, and chicken reported from grocery stores during the second week of the month.  The data does not include special features, sales, in store coupons, or customer loyalty card discounts.  As a grocery store price, it does not include meat prices at restaurants. 

Meat prices (and production for that matter) exhibit a considerable amount of seasonality.  Both supply and demand factors contribute to price seasonality.  For example, on the supply side, pork production tends to peak in the Fall after hitting its seasonal lows in Summer.  Tighter supplies in the Summer would suggest that prices should peak in Summer.  But, on the demand side, individual cuts may peak at different times of the year, for example, hams at the holidays or grilling season favorites.  Economists often compare the most current price to those of last year at the same time, simply to account for normal seasonality of prices.  But, for many consumers thinking about inflation a more useful comparison might be to last month or the last couple of months to account for the trend in prices.

The latest data represents June prices across the U.S.  The Choice beef price in June was $8.119 per pound, less than 1 cent per pound higher than May.  So far this year, Choice beef prices peaked in April at $8.151 per pound.  Compared to a year ago, beef prices were about 2 cents lower per pound.  Pork prices totaled $4.88 per pound in June compared to $4.919 per pound in May and $4.684 per pound in June of last year.  Chicken prices are reported in two ways: as a whole, fresh bird retail price or as a composite price made up of various cuts.  The composite retail price was $2.403 per pound in June compared to $2.44 in May and $2.504 in June 2023.  

On the whole, the latest retail meat price data indicates some easing of meat price inflation in June.  Some recent falling cutout values for beef and pork related to more production of both relative to last year could be part of the reason for lower prices.  Some consumer push back against high prices could have pressured prices lower as well.  Retail prices the rest of the year will be affected by reduced beef supplies and more pork and poultry.

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Anderson, David. “Retail Meat Prices Ease a Little.” Southern Ag Today 4(29.2). July 16, 2024. Permalink

Two big USDA reports in the last week have boosted livestock prospects at the expense of corn prices.  The annual Acreage report included larger-than-expected corn acres which put downward pressure on corn prices. The report listed corn acres at 91.5 million acres which was 1.4 million acres higher than the March Prospective Plantings report projected. After corn prices surpassed $6 for the 2022/23 marketing year, prices fell below $5 for the current marketing year, and are projected to be closer to $4 for the 2024/2025 marketing year. 
 
While higher than previously projected, corn acres will be slightly lower than 2023 totals. However, good growing conditions are supporting higher yield expectations when compared to 2023. The latest WASDE report included a yield estimate of 181 bushels per acre which would be higher than the 177.3 from a year ago. Stronger yields could lead to corn production for 2024 not being far off from the 2023 total. 
 
Also released last week was USDA’s Quarterly Grain Stocks Report which includes estimates of corn stocks held on farms and in elevators. Total corn stocks on June 1^st were estimated to be 5 billion bushels, up 22 percent from 2023 and the highest June 1 total since 2020. Most of these stocks are still being held on farms as farmers await better pricing opportunities. But, the old common problem arises of holding stocks while supplies grow and prices continue to fall.  On farm corn stocks were just over 3 billion bushels, which is roughly 800 million more than last year and is the largest June 1 total since 1988. 
 
Overall, the news is positive for livestock producers. The simple takeaway is that corn production and stocks are expected to be plentiful, and corn prices are back to lower levels after surging a few years ago. This should continue to bring relief to livestock feed costs and reduce the cost of gain for cattle.  This year’s corn crop is not in the bin yet, so production risks remain that could influence price. Falling corn prices should continue to push calf prices further into record territory.  Returns to hog and poultry production will get a much needed boost from lower feed costs.

Maples, Josh, and David Anderson. “Falling Corn Prices, Higher Calf Prices.” Southern Ag Today 4(28.2). July 9, 2024. Permalink