Category: Livestock Marketing

Over the weekend, USDA APHIS announced a new restriction on livestock from Mexico due to an occurrence of New World Screwworm (NWS) in the Southern Mexican state of Chiapas.  APHIS is restricting the importation of animal commodities originating from, or transiting through, Mexico immediately while awaiting more information of the size and scope of the outbreak.

History

The screwworm, Cochliomyia hominivorax, is a fly that is a flesh-eating parasite. The screwworm fly spreads by depositing its eggs around an open wound.  The larvae then crawl into the wound feeding on the animal’s flesh.  The adult female fly mates only once in its lifespan, which led to the strategy of controlling the screwworm fly by releasing sterile male flies, thus preventing reproduction.  Eradication efforts through releasing sterile male flies began in the 1950s and resulted in eradication from the U.S.  In fact, it was ranchers who donated money and raised $2.8 million to match the federal appropriation that ramped up eradication in Texas in the early 1960s.  Later coordinated efforts with Mexico and Central American countries pushed the flies down to Panama.  But in recent years, the flies have been making a comeback in Central America overwhelming the strategy of sterile fly release.  The last reported occurrence in the U.S. was in deer in Big Pine Key, Florida in 2016.  

During the eradication efforts in the 1950s, ranchers could send in sample tubes of flies for identification.  Knowing the location of occurrences allowed for pinpointing release areas.  Figure 1 is a picture of the sample tubes.  Figure 2 is a map of the screwworm overwintering range in average years (Graham, 1985).   

Imports

Feeder cattle imports from Mexico are an important source of cattle for U.S. cattle feeders and beef production.  Imports have a highly seasonal pattern with the most entering in the Spring and late in the year.  These steers and spayed heifers often first go to stocker grazing programs and then to feedlots.  Imports in 2024 have amounted to about 5 percent of feedlot placements.  Cattle enter the U.S. through 11 ports of entry: 3 in Arizona, 2 in New Mexico, and 6 in Texas.  Year to date, 1,195,702 feeder cattle have entered the U.S.  Of those, 29 percent have entered through Arizona, 51 percent through New Mexico, and 20 percent through Texas.

A simple, back of the envelope analysis would estimate that a 5 percent decline in feeder cattle supplies would lead to about an 8.6 percent increase in feeder cattle prices, all else held equal.  We might also consider the impact regionally, as most of these feeder cattle would be fed in the Southern Plains or the Southwest.  The limitation on imports would likely have a significant effect on feeders in those areas. 

Other Considerations

One of the major differences today compared to pre-eradication is the presence of many more deer and exotics.  In the “old days”, there were few deer in parts of Texas due to the impact of screw worms on deer survival.  Eradication allowed rapid increases in the deer population.  The recent development of the exotic wildlife industry presents the potential for much larger economic harm from re-infestation.

Old timers will speculate that one reason there were so many great team ropers from Texas is because of the constant checking cattle closely and doctoring them for screw worms.  The pest even enters popular literature in The Good Old Boys by Texas writer Elmer Kelton.  In this novel the protagonist, Hewey, spends a ton of time roping, checking, and doctoring their calves.

It’s important to remember that screw worms can be controlled.  The use of sterile male flies allows proven and effective control.  Cooperation with our southern neighbors pushed eradication as far as Panama.  But, as is often the case, these old menaces return.  Fortunately, control is possible but, it requires vigilance.

Figure 1.  Tubes for Ranchers to Return Screwworm Samples to the Eradication Program.  From the library of David Anderson.  

Figure 2.  Map of Screwworm Range.  

For Further Reading:

Graham, O.H. (editor) “Symposium on Eradication of the Screwworm from the United States and Mexico.” Entomological Society of America.  1985.

Kelton, E.  The Good Old Boys.  Doubleday.  1978.

Novy, J.E.  “Screwworm Control and Eradication in the Southern United States of America.”  FAO.

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Anderson, David, Josh Maples, and Charley Martinez. “An Old Menace.” Southern Ag Today 4(48.2). November 26, 2024. Permalink

The Fall is often an interesting time to look at hog and pork markets because production typically increases seasonally, and prices decline.  Holiday ham demand usually kicks in to partially offset supply driven lower prices.  This year has some notable differences happening.

The hog industry has had a 7-month run of profits according to Iowa State University’s estimated farrow-to-finish returns.  Profits have been generated by much lower feed costs in recent months.  But, those profits are following huge financial losses in 15 of the preceding 17 months.  Losses have led to a reduction in the breeding herd and in sows farrowing.  USDA’s September 1 hogs and pigs report indicated the smallest breeding herd since 2016.  About 18 percent of the nation’s breeding herd are in the South.  June through August farrowings were estimated to be the smallest since 2013.  Only increasing numbers of pigs per litter, hitting 11.72 in the third quarter of the year, supported slaughter numbers.  Over the last month hog slaughter and pork production have been almost equal to a year ago.

While pork production has increased seasonally this Fall, supplies appear to be tightening compared to a year ago.  Hog prices are enjoying a counter-seasonal increase.  Iowa-Southern Minnesota barrow and gilt carcass prices have increased from about $75 per cwt to $84 per cwt over the last month.  The cutout is up about $7 per cwt over the same time.  Wholesale prices are higher for pork bellies, trimmings, ribs, and hams.  Bellies are up about $30 per cwt over the last month to $2.02 per pound.  They were $1.24 per pound a year ago. Trimmed pork spareribs hit $1.75 per pound last week compared to $1.18 a year ago.  

In the meantime, more retail pork features and specials are occurring compared to a year ago.  Retail prices for boneless hams are a little higher than a year ago while bone-in hams are a little cheaper than a year ago in the week leading up to Thanksgiving according to USDA’s retail price report. 

It’s going to take some sustained higher hog and pork prices to boost profitability enough to increase production in the coming year.  It’s likely that higher pork prices are ahead for 2025.

Anderson, David. “A Look at the Hog Market.” Southern Ag Today 4(47.2). November 19, 2024. Permalink

The January 2025 feeder cattle futures contract dropped roughly $25 per CWT from mid-July to mid-August. But, since early September, futures contract prices have rebounded about $15 per CWT. Points on the solid maroon line in the chart are the end of day futures contract prices from last Friday for each feeder cattle futures contract month. Points on the dotted black line are end of day prices back on September 6^th, after the big decline.  

The chart nicely illustrates seasonality within the futures market. Auction prices for 750-pound feeder cattle are typically lowest in the spring months when those calves are yearlings.  Futures prices reflect expectations of seasonal patterns too, but there are a few steps to thinking through the impact. 
 
First, it’s important to remember that feeder cattle futures prices are the “market’s” expectation of what the CME Feeder Cattle Index will be at the end of the contract month. The “market” is made of buyers and sellers trading the futures contract. The feeder cattle index is calculated from auction prices for 700-899 pound steers collected by USDA-AMS for a 12-state region in the middle of the U.S. (there are no states east of the Mississippi River included in the index). It is a 7-day rolling weighted average, so today’s index value is a weighted average of the auction prices over the past week. Most auctions only operate one day per week so the 7-day average catches sales during a week’s period.
 
How does seasonality fit into this? If prices are typically expected to be lower during certain months (i.e. seasonality), then the futures contract prices for those months will likely be lower because traders are “baking-in” the seasonality expectations. The chart above is a good example. Since these prices reflect 700-899 pound feeder steers, the market (futures traders) is expecting auction prices (the CME index) to be lower during the spring months before rising seasonally as summer approaches.

This exercise illustrates the importance of understanding how the value of your cattle correlates to futures market prices for risk management or for forecasting prices. Your cattle may not be 800-pound steers sold in that 12-state region. But if you know your cattle are usually $10 above or $10 below the futures market at sales time, then then you can still use the futures market’s expectations to forecast the expected value of your cattle and to participate in price risk management tools.

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Maples, Josh. “Feeder Cattle Futures Prices.” Southern Ag Today 4(46.2). November 12, 2024. Permalink

Shell egg prices have proven highly variable in the last few years. Consumer demand for eggs can be equally erratic but predictably increases around Easter in the spring and then again around the fall/winter holidays. Prices typically go up in response to this higher demand. Beginning in early summer, 2024 prices rose above and remained higher than in 2023.  They spiked again in August due to lower supply caused by laying hen losses earlier in the year from Highly Pathogenic Avian Influenza (HPAI). Prices then dropped as flocks were repopulated and late summer demand fell. Now, leading up to the fall holiday season, we see egg prices spiking again, and they are higher than they were not only in 2023 but also higher than the same time in 2022. Later in 2022 wholesale egg prices reached an all-time high approaching $5.00/doz. (fig 1). When we compare 2022 to 2024, we see a haunting premonition of where egg prices could be headed this holiday season. The current price spike looks to be holiday demand coming in the face of a decrease in layers producing the eggs; the same thing we saw in 2022.

When we compare current 2024 numbers to the same timeframe in 2022 and 2023, there are a few comparable trends worth noting. Current shell egg inventory and layer numbers have dropped 13.7% and 3% respectively from the previous year, while price is significantly higher (over 300%). The current price is also 22% higher than the same time in 2022 when the egg and layer inventories were very similar to now (fig 2).  It’s possible we could see the same prices on the horizon as we saw in late 2022.

While the supply and demand numbers may not bode well for egg consumers, layer producers have additional concerns.   December corn is currently trading in the $4.28/bu. range and looks to stay below $4.60 through spring according to the USDA futures price estimates. This looks to be a positive for egg producers as the resulting lower feed cost could help egg producers recover from their losses as well as last year’s low egg prices – IF they have the hens to produce the eggs. The concern is that the HPAI threat still looms large over the layer industry. HPAI losses are driving the current low inventories of layers and eggs. In October of this year, 2.84 million layers were lost to HPAI to begin the holiday season. Year-to-date, the layer industry has lost 20.75 million layers, which equals 6.8% of the total current flock of producing hens. It is difficult for layer producers to keep up with current demand in the face of such losses. And now, the fall waterfowl migration is ramping up, bringing with it an increased HPAI risk. According to the USDA, there are currently only 4.1 days of shell eggs on hand for sale. Therefore, any additional hen losses could have a significant impact on the market. Whether 2024 prices will reach the highs of 2022 remains to be seen, but if HPAI continues to devastate producing layer flocks, prices this year could reach and even surpass 2022.

Figure 1: Egg prices were relatively stable, though above last year, until mid-summer, when they spiked due to laying hen losses that occurred earlier in the year. Prices spiked again this fall due to a convergence of additional hen losses to HPAI and an increasing demand for the holidays.

Figure 2: Laying hen inventory and egg inventory for 2024 looks hauntingly like 2022, when late season egg prices rose to historical levels

USDA released the October Cattle on Feed report on Friday, October 25^th.  The most anticipated number in the report was the quarterly number of heifers on feed.  Once per quarter, the report includes a breakdown of the number of steers and heifers on feed.  The heifers on feed have been some evidence of any herd rebuilding beginning.  The report indicated 40,000 fewer heifers on feed October 1 than last October 1.  That is less than one percent below last year.  It is the second largest number of heifers on feed for October 1 in the data going back to 1996.  

The continued large number of heifers on feed does not indicate much herd rebuilding in the works.  The drought monitor map indicates some drought across most of the country likely reducing some enthusiasm for heifer retention.  But, on the other hand, longer feeding periods mean that heifers are on feed longer, which would keep the number on feed higher.  A few more spayed heifers have been imported from Mexico this year than last, also contributing to more heifers on feed.  

Now for the headline numbers.  Feedlot marketings in September were two percent larger than the year before.  That translates to almost 2,000 head per day more than last year.  Placements were two percent smaller than a year ago.  More marketings and fewer placements resulted in the total number of cattle on feed being 4,000 head fewer than last October 1.  The number on feed was less than one-tenth of one percent below a year ago, so not much really but, it was the first month with fewer cattle in feedlots since June.  All in all, the report did not offer much of a surprise.

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Anderson, David. “Fewer Heifers on Feed.” Southern Ag Today 4(44.2). October 29, 2024. Permalink