Category: Livestock Marketing

The beef cow inventory is at a sixty-three-year low. Tight supplies have driven cattle markets and calf prices have increased by roughly $1 per lb over the last two years. Limited heifer retention and beef cow slaughter exceeding 10 percent of beef cow inventory for the year indicate that beef cow numbers will be even lower in 2025. Cowherd expansion will happen eventually but, there appears to be little evidence that producers have an appetite for that currently. For the cow herd to grow, we need to have the 3 Ps of herd expansion at the cow-calf level: profit, pasture, and patience.

The first P is probably the most obvious – profit. There will be no interest in cowherd expansion without money being made at the cow-calf level. While profit has been there recently, it is important to remember that these strong calf price levels are relatively new. We actually went from November 2015 to February 2023 (7 years and 4 months) with the state average price of a 550 lb medium / large frame #1-2 steer in Kentucky being under $2 per lb. Coming out of that challenging 7-year period, I think a lot of cow-calf operators have been cautious and guarded. Just as importantly, a lot of costs are substantially higher now than they were ten years ago, so comparing current calf prices to historical calf prices is misleading. Still, I think current returns at the cow-calf level are sufficient to see heifer retention if the other two Ps fall into place.

The second P is pasture, and I am using pasture broadly to describe forage/feed availability. While profit may be the first driver of expansion, no level of profit can make it rain, and limited pasture and hay supplies can nix any interest in expansion. As a recent example, drought was so widespread in the US during 2022 that expansion would have been highly unlikely, regardless of calf price levels. Both hay supplies and pasture and range conditions have improved since 2022, but a lot of areas have been dry this year, including my home state of Kentucky. 

The final P is patience, and I think this may be the one that is most lacking in the cattle industry right now. When a farmer decides to expand the size of their cowherd, they are trading income from the sale of heifers today for a stream of income from additional calf sales in the future. Weaned heifers are valuable in 2024 and passing up that income in the short run is difficult. Developing heifers is also costly and is an expense that is incurred well before additional calves can be sold. These same factors were largely present when our last expansion began in 2015, but interest rates were considerably lower than they are today. Higher interest rates increase the cost of production and also increase the preference for income today, rather than in the future. Put another way, patience is at a premium in higher interest rate environments like the present.

At some point, the three Ps will line up and herd expansion will start. When that will happen is a difficult question to answer, but it is safe to say there are no signs of heifer retention right now. Limited heifer retention, combined with cow slaughter levels, suggest that another decrease in beef cow inventory is almost certain when the January 2025 estimates are released. So, supply fundamentals are encouraging and should continue to support calf prices next year. Many are also expecting some reductions in interest rates over the several months, which may factor into this decision at the producer level. 

If weather cooperates, I do think increased heifer retention could be seen in 2025, but it is important to remember that this would just be the first step towards expansion. And the initial impact of heifer retention is actually a tightening of calf markets as those heifers are held back. There are always risk factors out there, but I remain optimistic about the next couple of years largely because cattle supplies are tight and likely to get tighter. We are not seeing signs up expansion yet, so all we can do is watch for the 3 Ps!

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Burdine, Kenny. “The Three Ps of Herd Expansion: Profit, Pasture, and Patience.” Southern Ag Today 4(41.2). October 8, 2024. Permalink

The summer and fall months are when a majority of producers are selling spring-born calves or yearlings from last fall. Due to the increase in supply of calves, prices typically decline during these months as demand from feedlot buyers is more easily met than in the spring. In Florida and nationwide, we started seeing this decline in prices a little earlier (April), which is partly due to the market responding to the outbreak of HPAI H5N1 in dairies, earlier trader’s recession fears, and more fed beef production than last year. However, prices still remained well above 2023 levels. Going into the summer months, as mentioned in a previous SAT article, prices followed the seasonal trend of declining in the summer and fall.

            Figure 1 shows the average monthly price index for 450-500 lb steers in Florida from 2018-2022. This figure is simply a visual to show how we know the current dip in prices is normal for this time of year. The price index (blue line) shows the relationship between each month’s average price and the annual average price. When the price index is above 100%, that means prices in that month, on average, are higher than the annual average, such as in the spring. When the price index is below 100%, that means prices in that month, on average, are lower than the annual average, such as in the fall.   

            Now, Figure 1 only represents 2018-2022, not 2023 when prices were transitioning from a low point to a high point. Figure 2 shows how this transition period did not follow the typical seasonality trend (orange line). Prices continued rising into 2024, but then began falling as previously mentioned and much like we saw in 2015. However, the difference to notice between 2024 and 2015 is inventory levels and the rate of expansion (Figure 3). In 2015, expansion had already started when prices were at the levels we are seeing today. There was no incentive for prices to climb back up after the typical dip in the fall. In the current market, we have not started expanding and have already hit new record-high calf prices. This indicates that while we are experiencing the effects of seasonality this year, it is not expected that we are headed for a continuous low level of cattle prices for quite some time.  

Figure 1. Average Monthly Price Index for Florida Steer Calves

Figure 2. Average Monthly Prices for Steer Calves

Figure 3. Beef Cow Inventory and Monthly Calf Prices

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Baker, Hannah. “Seasonal Price Trends & Inventory.” Southern Ag Today 4(40.2). October 1, 2024. Permalink

The latest USDA Cattle on Feed report was released Friday and showed placements of cattle into feedlots during August were 1.4 percent lower than during August 2023. Marketings of fed cattle out of feedlots were down about 3.5 percent from a year ago, partially due to one less business day in August 2024 than in August 2023. Both of these numbers were within pre-report expectations and will likely not be big market movers. 

Most of the decline in placements from a year ago occurred in placements of cattle weighing less than 800 pounds. Placements of cattle in this weight range were 3.4 percent lower while placements of cattle weighing more than 800 pounds were 1.4 percent higher. Placements in both Kansas and Nebraska were down about 3 percent while placements in Texas were down nearly 6 percent as compared to a year ago. Placements in Colorado were the exception and were up nearly 30 percent. 

Despite the lower placements, the total number of cattle in feedlots with more than 1,000 head capacity on September 1st was up 0.6 percent compared to a year ago. This continues the trend of cattle staying in feedlots longer. Total placements of cattle into feedlots during 2024 is down about 2 percent but longer feeding periods have reduced turnover and helped to keep inventory levels from fully reflecting the declining calf crop totals. 

Longer feeding periods are leading to higher cattle weights. The average dressed weight for federally inspected steers during August 2024 was 930 pounds. Assuming a dressing percentage of 62.5 percent, this suggests an average live weight of 1,488 pounds. This is the highest August steer dressed weight average on record, easily surpassing the 911-pound average during August 2020. Heifer dressed weights also hit an August record at 840 pounds on average. The higher dressed weights are offsetting much of the impact of lower cattle numbers on beef production. Total beef production in 2024 is now expected to be very close to beef production in 2023 despite fewer head processed.

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Maples, Josh. “Cattle on Feed and Record High August Fed Cattle Weights.” Southern Ag Today 4(39.2). September 24, 2024. Permalink

Cattle and calf prices have been sliding lower for more than a month.  For the most part, prices remain higher than last year at this time, even though they are declining.  In the middle of this slide comes the next cattle on feed report which will indicate fed cattle supplies for the next few months.  

The next cattle on feed report will be released on Friday, September 20^th.  Most market analysts’ forecasts are published by now and, generally, indicate that they expect marketings and placements to be below last year.  Feedlot marketings should be down about 3.5 percent lower than last year.  While below last year, one less workday during August means that daily average marketings were slightly higher than last year. 

There is a fairly wide range of market analysts’ estimate of placements, from down 4 percent to up 2 percent.  Seasonally, August placements tend to be large as calves born in the Spring and yearlings coming off summer grazing programs start to be placed.  September and October tend to be the months with the most feedlot placements.  Fewer feeder cattle were sold this August than last year according to available data on feeder cattle sales and feeder cattle reported on the CME feeder cattle index.  But, about 29,000 more feeder cattle were imported from Mexico during August.  August placements also occurred against a backdrop of falling fed cattle futures prices.  Even though corn prices continued to decline lower fed prices forced lower feeder cattle prices throughout the month.

Typically, more feeder cattle are placed than fed cattle marketed in August.  That is likely the case again this year, which leaves the number of cattle on feed up about 0.3 percent on September 1.  So, compared to last year supplies of cattle in feedlots implying fed beef production should remain close to last year’s level for most of the rest of the year.  

The report should support the continued trend of more beef production from fed cattle than a year ago.  Both fed steer and heifer weights are headed higher, seasonally, and are at record highs for this time of the year. The percent of beef grading Choice is higher than a year ago indicating that there are larger supplies of Choice beef on the market compared to last year.  From a beef supply perspective, it should not be surprising to see the Choice beef cutout and cattle prices struggling to gain ground compared to last year.

Watch for placements and the total number of cattle on feed in the report on Friday, September 20^th.  Those will provide some good information on beef supplies for the rest of the year.  Placements should be larger in September and October as Fall runs of calves start across the South and the rest of the country.

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Anderson, David. “Summer Slide.” Southern Ag Today 4(38.2). September 17, 2024. Permalink

It often seems that hay markets and prices are strictly local but, supplies and weather around the country can have far reaching effects.  Understanding inventory in the hay market can be as easy as tagging a new calf with an unhappy mama.  However, there is some data that can help, at least, provide an understanding of regional and national hay production.  Depending on the forage base (cool season perennial, warm season perennial, or warm/cool season annual plantings), rain and fertility can be the primary contributors to yield expectations.  Not to discount the impacts of natural disasters and insects.  Understanding the total inventory on hand entering the production season, consumption of hay stocks, and impact of exporting hay stocks can help in forming some price expectations and suggest some earlier or later purchases.

Expanding and contracting drought conditions plagued the southern region during production periods for warm season perennials and annuals.  Hay production regions in the south experienced some relief from hurricanes and tropical storms.  Depending on production schedules Figs. 1-3 illustrates the impact of drought conditions on summer forages.  

Figure 1.

Figure 2.

Figure 3.

May 1 U.S hay stocks and disappearance steadily decreased starting in 2020 (Fig 4).  However, coming out of winter in 2024 hay stocks rebounded to 2020 stocks level.  Hay disappearance is largely driven by hay feeding, winter’s length and severity, and the size of the cow herd. Disappearance started decreasing in 2020 signaling reduced total hay needs.  In 2024, use of hay returned to 2020 use levels.

Figure 4.

It often surprises people to learn that the U.S. exports a significant amount of hay, largely alfalfa and other high value specialty hays.  The US hay export market moving three-year average valuation is $1.51 billion.  As of 2023, the export market was valued at $1.34 billion.  Total hay exports have trended downward since 2022, mainly driven by weak demand from China.  The top four countries that import U.S hay stocks are China, Japan, Saudi Arabia, and South Korea.

So, are we just to expect the market to behave like 2020 due to stock levels?  A notable difference in the southern region will be the potential production impacts from summer droughts.  Hay prices are beginning to decline in parts of Texas due to abundant production from this year’s rains.  Hay markets do represent climate dynamics with a few large weather market issues thrown in.  The storm forecasted for later this week could bring rains for grass growth in drought affected regions of the South.  But it’s very late in the growing season for much hay production.  USDA will report a hay inventory estimate in December which will provide a good stock on hand estimate, so we will wait on that early Christmas present.   

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Fischer, Matthew. “Inventories, Weather, and Local Hay Markets.” Southern Ag Today 4(37.2). September 10, 2024. Permalink