Category: Livestock Marketing

One estimate that analysts like to calculate from the Cattle Inventory Report is feeder cattle supplies outside feedlots as of January 1. USDA does not report feeder cattle supplies directly, but it is easy to calculate using other categories in the report. The last row in the table listed below estimates feeder cattle supplies outside feedlots for U.S., Arkansas, Mississippi, and Kentucky, respectively. 

Using data from the table, adding Other Heifers, Steers 500 Pounds and Over, and Calves Under 500 Pounds (steers, heifers, and bulls) gives the Total Feeder Cattle Supply. Subtracting Cattle on Feed gives Feeder Cattle Supplies Outside Feedlots. As of January 1, 2022, there were 25.5 million head of feeder cattle outside feedlots, a 2.6 percent decline from last year. Arkansas had a significant decrease in feeder cattle supplies, down 9 percent year over year. In Mississippi, feeder cattle supplies were about even with the year prior, while Kentucky had a 5 percent decline. 

Why did feeder cattle supplies decline so dramatically? Strong fourth-quarter prices, coupled with drought, likely resulted in producers selling cattle that they would have otherwise kept through the winter. For example, Arkansas prices for 500-600 pound steers averaged $163/cwt for Nov-Dec 2021, or 13 percent higher year over year. These high prices provided incentives for producers to sell some cattle earlier. Cattle on feed data showed that cumulative Nov-Dec feedlot placements were 5 percent higher than 2020 placements for the same months.

Mitchell, James. “January 1 Feeder Cattle Supplies Decline 2.6 Percent“. Southern Ag Today 2(7.2). February 8, 2022. Permalink

Yesterday, the National Agricultural Statistics Service (NASS) released the biannual Cattle inventory report. This report provides a review of the changes in cattle inventory over the last year. Using the Cattle report, we can glean insight into the expected cattle supply and resulting beef supply in the near future. These supplies also inform our longer-term cattle and beef price expectations. 

The last two January reports indicated that the number of beef cows that calved declined approximately 1.6% and 1.1% in 2021 and 2020, respectively. Declines in the number of cows are followed by a decline in the number of calves and, finally, a lower beef supply; one less cow calving in spring 2020 means one less live calf placed on feed in the fall of 2020, and subsequently, there is one less fed calf available for processing in summer 2021. Lower supplies, all else equal, mean higher prices. 

Since 1990, in years when the cowherd shrank year to year the average decline in all cattle and calves was 1.2%. Yesterday’s inventory report indicated a 2% decline in all cattle and calves (from 93.8 million head to 91.9 million head), a 2.4% decline (from 30.8 million head to 30.1 million head) in the beef cow herd, and a 1% decline (from 35.5 million head to 35.1 million head) in the calf crop from 2020 to 2021. The larger drop in inventory than recent historical averages was likely a result of persistent drought across much of the western U.S. In fact, the average change in inventory in states to the west of the line including Texas to North Dakota was a loss of 2.7%, whereas the average change in inventory to the east of that line was a loss of 1.9%. A final interesting point: the number of heifers expected to calve in the upcoming year declined 3% year over year, suggesting a continued contraction in the cattle herd over the next year. The contraction in the cattle herd will support higher prices in the next year, all else equal. 

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Benavidez, Justin. “Cattle Inventory Report.” Southern Ag Today 2(6.2). February 1, 2022. Permalink

The thought of marketing cull livestock is generally not at the top of mind for most livestock producers. However, it is an important decision from both a marketing and management standpoint. More specifically, most livestock producers are entering a period in which cull livestock prices tend to be increasing for cattle and hogs or they will be drastically decreasing for small ruminants. Thus, these seasonal price tendencies can be extremely useful when making marketing and management decisions.

Utility cow prices typically experience their largest price increase in February with prices for this class of animal peeking in May or June. Selling cows at the highest price point in the year may or may not be the best decision, but there is a nice marketing window for this class of animal from February through June. Hog producers generally experience a similar seasonal pattern for slaughter sows. The price of slaughter sows will increase from February through the summer months with a nice marketing window between April and August.

From the small ruminant standpoint, slaughter ewe and doe prices are typically at their peak in January and begin to decline in February. Prices then tend to decline through most of the year. Thus, sheep and goat producers may want to consider marketing cull ewes and does in the near term to capitalize on their current value.

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Griffith, Andrew P. . “Seasonal Price Indices for Cull Livestock.” Southern Ag Today 2(5.2). January 25, 2022. Permalink

While poultry remains the least expensive animal protein, prices are at a sustained multi-year high. Prices normally fluctuate in somewhat of a seasonal fashion, as seen in the 3-year average line above. COVID caused an extreme disruption to the downward side in Q2 2020. Then 2021 changed everything again. Early spring brought the market back to somewhat normalcy as dining away from home regained popularity. Then the highly touted “chicken sandwich wars” heated up as restaurant chains pushed for ways to get customers back through the doors. These and other improving market conditions began to drive prices up in early Q2 ‘21. At the same time, company processing plants struggled with employee absenteeism. Combined with sustained transportation issues and other supply chain weaknesses from the last year, the supply of chicken was unable to keep up with the new soaring demand. The result is sustained high and rising 2021 prices (brown line in chart). 

Monthly Composite Broiler Price, Weighted Average $/cwt

What will 2022 bring? As poultry companies try to expand live operations to meet demand and keep plants operating at full capacity, they are meeting difficulties on both fronts. Despite increasing plant wages, many are still reporting sustained 20%+ absentee rates for many shifts. Then along came increasing prices for building materials and labor. Contract growers who raise the chickens are finding it almost impossible to afford to build the new housing integrators need to supply more birds to the market. To secure new housing, integrators are having to invest more into the farms, increasing live production costs. It is suspected that these factors along with continued supply chain struggles will ultimately influence prices to stay high in 2022, and possibly beyond. 

Brothers, Dennis. “Poultry’s Perfect Storm in 2021-22“. Southern Ag Today 2(4.2). January 18, 2022. Permalink

Drought conditions have troubled livestock producers in many parts of the U.S. over the past few years. According to the latest report, approximately 50 percent of cattle inventory is in an area currently in some level of drought conditions. Most of the severe drought areas are in the Great Plains and Western U.S. The Western and Great Plains regions ended 2021 with about 60 percent of pasture in poor or very poor condition. Drought has contributed to beef cow herd liquidation in severe regions. 

Drought areas in the Southeast are not widespread, with many areas receiving much precipitation in recent weeks. However, some drought areas have developed in the Southeast in recent months across TX, LA, AR, and MS. Cool season forages such as winter ryegrass or winter wheat are the primary forages grown during this time of the year and will need moisture through the winter. The latest drought monitor shows approximately 65 percent of U.S. winter wheat production is in an area experiencing drought. While most of this production is in the Plains region, some is in the Southeast. Cattle producers with lower winter forage production due to lack of moisture may need to increase supplementation for cattle over winter – with higher feed and hay costs. 

Maples, Josh. “Cattle Areas in Drought“. Southern Ag Today 2(3.2). January 11, 2022. Permalink