Category: Livestock Marketing

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

Whether or not herd rebuilding has started is among the most frequently asked questions.  For the most part, the answer is there is not much evidence of rebuilding yet.  The number of heifers held for herd replacement in the January 1 inventory report was the smallest on record.  The quarterly cattle on feed reports indicated more heifers on feed than a year ago which implies more heifers placed in feedlots rather than kept in producers’ herds to produce a calf next year.  However, there is a different set of data that might shed some more light on heifer retention.

Monthly cattle imports from Mexico have been greater than a year ago during every month of 2024.  We import both feeder steers and spayed feeder heifers which eventually go to feedlots.  The quarterly cattle on feed reports, which indicate the number of heifers on feed, would include those heifers that came from Mexico. If the number of feeder heifers imported from Mexico is large enough, it could suggest fewer U.S.-born heifers have been placed on feed in 2024. This could be an indication of fewer U.S. heifers available or that more heifers were held back for replacement.  

We have the weekly data for feeder steers and feeder heifers imported from Mexico beginning in January 2012.  Through the week of August 24, there were 347,401 feeder heifers imported during 2024.  That is 176,644 more than the same period last year.  It is also the most feeder heifers imported for this time period going back to at least 2012 when 303,290 head were imported.  Feeder heifers make up 37 percent of total feeder cattle imports, the highest since at least 2012. Over the same number of weeks, total feeder cattle imports (including steers) are the second largest behind only 2012.  

What does this mean for U.S. herd rebuilding?  If we take the total number of heifers on feed on July 1 and then subtract the number of feeder heifers imported from Mexico during January-June, it would indicate 126,784 fewer domestic heifers on feed than last year.  It is probably too big of an assumption to think all of those imports have already been placed in feedlots since many imported feeder cattle go to pasture before heading to feedlots.  Still, this result might indicate that a few more domestic heifers have been held back, although some of this decline could simply be due to fewer heifers born in the U.S. We certainly aren’t convinced of any widespread expansion yet.  However, larger heifer imports from Mexico are propping up the percentage of U.S. heifers on feed and need to be carefully considered when making comparisons to previous years.  

Anderson, David, and Josh Maples. “Feeder Heifer Imports from Mexico and U.S. Herd Rebuilding.” Southern Ag Today 4(36.2). September 3, 2024. Permalink

Cattle prices have reached record highs, and the cattle herd is the smallest since the 1950s. USDA predicts high domestic prices will result in increasing imports in the coming years. The U.S. is an attractive market, particularly for lean beef trimmings for ground beef. This article briefly discusses the recent spike in live animals, fresh/chilled, and frozen meat imports.  

During the first half of 2024, imports of beef and live cattle soared. From January to June 2024, the U.S. imported 175,441 more head of cattle than in the same period last year, a 19% increase, reaching 1.12 million animals (Fig. 1). Over the same span, imported Fresh/Chilled and Frozen beef rose 11% and 29%, totaling 331,550 and 365,067 metric tons (MT), respectively (Fig. 1). Tight lean supplies along with high domestic beef prices help explain the growth in foreign acquisitions. 

As the U.S. cattle herd declines, live animal imports have increased, mostly from Mexico (Fig. 2). Drought in Mexico and high U.S. cattle prices helped fueled more U.S. feeder cattle imports. In 2023, Mexican sales to the U.S. jumped 43%.  That is 375,879 more head of cattle than in 2022. The Mexican herd has been stable recently, with FAS-PSD/USDA forecasting 0.4% growth in 2024.

Imported fresh or chilled beef has been growing over the past decade (Fig. 3). In 2023, the U.S. imported more than double the quantity it did in 2013 (Fig. 3). During this period, Canada provided, on average, half of the U.S. imported fresh/chilled meat while Mexico had, on average, 34% of market share. FAS-PSS/USDA predicts Canada stocks will drop 2% in 2024, down to 11.06 million head. 

The amount of foreign frozen beef increased by 20% from 2022 to 2023, totaling 0.57 MMT last year (Fig. 3). In 2013, Australia and New Zealand each held 41% of the frozen imported beef market. However, their market shares declined to 28% and 29% over the last decade. A two-year drought (2019-20) affected Australia’s supply. Since 2020, shipments from Brazil expanded, reaching 90,303 MT in 2023, representing 16% of the market share. When China temporarily banned Brazilian beef imports in 2021, Brazil diverted its products to other countries, including the U.S. According to FAS-PSD/USDA, Brazil’s (-0.92%) and New Zealand’s (-1.66%) cattle herds are expected to decrease in 2024, while Australia’s stock is projected to increase by 4.93%.

U.S. beef imports are likely to continue ahead of last year as fewer cows are culled, and lean beef supplies continue to shrink.  Drought in Mexico will be a major factor in feeder cattle imports in coming months.

Figure 1. The U.S. Total Imported of Live Animals, Fresh/Chilled and Frozen Beef, Quantity: Jan – Jun 2023 vs. Jan – Jun 2024. 

Figure 2. U.S. Live Cattle Imports from Canada and Mexico, 2013-2023. 

Figure 3. The U.S. Total Imported Fresh/Chilled and Frozen Beef, Quantity: 2013-2023 

References

FAS-PSD/USDA (2024). PSD Reports. Livestock and Poultry. Retrieved from:   https://apps.fas.usda.gov/psdonline/app/index.html#/app/downloads

FAS-USDA (2024). Standard Query. Retrieved from: https://apps.fas.usda.gov/gats/ExpressQuery1.aspx

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Calil, Yuri. “U.S. Beef Imports: A Quick Look at Recent Trends.” Southern Ag Today 4(35.2). August 27, 2024. Permalink

In August 2021, the USDA announced a new market news report that would contain the distribution of weekly US fed cattle prices using price “bins” (LM_CT215). What makes this report unique is the way that price data are reported. Prices are reported in $2 increments, or bins, for negotiated cash, net formula, net forward contract, and negotiated grid nets. Figure 1 shows an example of how these weekly data are reported. The weekly weighted average live fed cattle price is highlighted in Figure 1.  The number of fed cattle selling at each $2 per cwt premium or discount to the average is reported in the grid.  

Figure 1. Snapshot of Data Reported in USDA National Weekly Direct Beef Type Price Distribution (LM_CT215)

The new distributional data allow market participants to understand fed cattle prices in more detail and go beyond minimum, maximum, and average prices for each marketing type. With this new distributional dataset for formula and negotiated fed cattle prices, we^[1] analyzed how weekly prices between these two markets interact with each other. One objective of our study centered around the impacts of negotiated prices on cattle markets. Specifically, as concerns have risen in relation to a possible thin cash market, we wanted to understand whether or not negotiated prices impact formula prices, or if it’s the other way around, as some market participants have suggested. Figure 2 displays a visual representation of the results from our study and shows how prices interact with each other (from August 10, 2021, to May 14, 2024). Current negotiated (orange) and formula (blue) prices for a given week are in the middle. We found that, depending on the market, current prices are impacted by the preceding three weeks of prices (the two columns on the right and left).

Figure 2. Negotiated Cash and Formula Fed Cattle Price Relationship Flow Chart. Data is weekly for the time range, August 10, 2021, to May 14, 2024 (n = 145).

Our study found that the current negotiated cash price for a given week (top middle orange box) is positively impacted by the week prior negotiated cash price (green dotted line), and negatively impacted by the negotiated price 3-weeks prior (solid red line). Current formula prices were found to be positively impacted (green dotted line) by the formula price from the prior week and the prior two weeks of negotiated fed cattle prices. However, formula prices were negatively impacted (solid red line) by formula price from two weeks prior. 

Despite concerns that the negotiated cash market is too thin and does not provide marketing information to the formula market, we find that the negotiated price does influence the formula fed cattle price. We find evidence supporting the conclusion that negotiated cash price information is being transmitted to formula price variability, which is expected because formula prices are designed to be based on the negotiated trade. Our results also indicate that formula prices do not impact on the negotiated price. 

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^[1] Boyer, C.N., E. Park, A. F. Ramsey, and C. Martinez. 2024. “Formula and Cash Negotiated Fed Cattle Price Relationships”. Journal of Agricultural and Resource Economics, forthcoming.

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Martinez, Charley, Christopher Boyer, Eunchun Park, and A. Ford Ramsey. “The Relationship Between Formula and Negotiated Cash Fed Cattle Prices.” Southern Ag Today 4(34.2). August 20, 2024. Permalink