Friday brings USDA’s first cattle on feed report of the year and will lead us to the cattle inventory report to be released on January 31st. This article takes a look at some expectations for the cattle on feed report.
All three categories, December marketings, placements, and the January 1 number of cattle on feed are expected to be smaller than last year. Feedlot marketings are expected to be about 5.5 percent smaller than last year. Marketings are highly influenced by the number of slaughter days in the month. Slaughter days are the number of days in the month minus holidays and weekend days. December 2022 had the same number of days, 21, as December 2021. That implies a lower daily rate of marketings. It’s likely that they were reduced by some winter storms and falling packer margins.
Feedlot placements, or the number of cattle placed into feedlots, in December is expected to be about 10 percent smaller than last December. Several sets of data are relevant to the number of cattle going on feed. USDA reports weekly data on feeder receipts, or sales, at auction markets, internet and video sales, and direct sales. It is not a complete accounting of all sales each week. It was 36 percent smaller than December 2021. The number of feeder cattle reported on the CME index was about 10.5 percent smaller than December 2021. About the same number of feeder cattle were imported from Mexico as last year.
Fewer cattle marketings and placements leaves about 3.5 percent fewer cattle on feed to start this year compared to last year. Fewer cattle on feed would continue the trend of shrinking numbers. It will lead to less beef production and likely higher cattle prices this year. One of the interesting numbers to look at in this report will be the estimate of the number of heifers on feed as of January 1. Heifers have been a growing percent of all cattle on feed as the cow herd has been reduced.
Author: David Anderson
Professor and Extension Economist Livestock and Food Products Marketing, Dairy, Policy
Since the fall of 2020, grain prices have risen significantly (Figure 1). Production shortfalls in the U.S. (derecho windstorm in August 2020 and drought in 2022), drought in South America, increasing feed demand in China, followed by Russia’s invasion of Ukraine, pushed cash grain prices, in many cases, to near record highs. Late in 2022, cash prices were back down to pre-Russian invasion levels, but still historically high.
Price forecasts for the 2023 crops will rightly focus much attention on planting intentions and yield prospects. High prices in the U.S. and globally provide market incentives for farmers to increase production.
But the other side of the supply and demand balance sheet deserves attention as well. Looking at the 2022/23 marketing year corn market in the U.S., feed and residual use and fuel use are the two largest use categories, 5.3 billion and 5.275 billion bushels, respectively. Next are exports at 2.075 billion bushels (Figure 2). Market conditions point to increased production in 2023, but what about use?
For the feed use category, data from USDA shows a decline in Grain Consuming Animal Units (poultry, pork, and cattle) over the last several years (USDA, ERS 2022). Gasoline demand, the foundation of ethanol use, is dampened by newer vehicles that use fuel more efficiently, or, in a growing segment of the automobile industry, do not use any gasoline at all (EIA, 2022). Export demand is impacted by the availability of exportable grain supplies from other major production areas, the value of the dollar, and global economic growth prospects. Grain use can go down when incomes and GDP slow down or decline. Global economic growth prospects will be slowed by the continued turmoil of the Russian invasion of Ukraine, broad inflation pressures, and lingering COVID pandemic effects (IMF, 2022).
Early season grain budgets for 2023 show high prices and high input costs resulting in tight margins for farmers in many production areas. An increase in grain supplies in 2023 relative to use could result in lower prices that squeeze these margins even more as we head into summer and fall.
Figure 1. Texas Cash Corn, Cash Sorghum, and Cash Wheat, Weekly, July 2020 to December 2022
Figure 2. U.S. Corn Use, 2005/06-2022/23
References
Energy Information Administration. “This Week in Petroleum”, available online at https://www.eia.gov/.
International Monetary Fund. “World Economic Outlook Report October 2022”, available online at https://www.imf.org/en/Home.
For well more than a decade, every year has brought a new wave of WOTUS uncertainty. At all but the stroke of midnight to close out 2022, the EPA announced the final revised WOTUS rule which is set to take effect this spring, 60 days after publication in the Federal Register. If headlines about WOTUS over the past decade have confused you, fear not. You’re not alone. The two steps forward – one step back progression of the hunt for WOTUS clarity follows a switchback trail of previous and current administrations. Despite this brand-new rule, the uncertainly might not be over just yet.
Since the inception of the modern-day Clean Water Act (“CWA”), enforcement agencies and citizens alike have been seeking to define “water of the United States” in an effort to determine where federal jurisdiction of a body of water begins and ends under the CWA. Sparing the dirty details, there have been four WOTUS eras worthy of mention here.
First, commonly referred to as the “Pre-2015 Rule,” the WOTUS rule in place since the 1980s was constructed through regulation and the implementation of key agency memoranda shaped by seminal judicial opinions.[1] The second era of mention began in 2015, when the EPA and Army Corps of Engineers (the “Corps”) issued a new rule, also known as the “Clean Water Rule” which was broader in application and was simultaneously praised as a long-overdue revision of the WOTUS rule, and also criticized as a gross overreach of authority. Due in part to legal challenges, the EPA and the Corps delayed implementation of the 2015 Clean Water Rule until 2020. Meanwhile, in 2019, the Trump administration repealed the 2015 Clean Water Rule and in 2020, proposed yet another new WOTUS rule, the “Navigable Waters Protection Rule,” or “NWPR,” the third mentionable WOTUS era.
The NWPR reversed course from the 2015 Rule, narrowing the scope of WOTUS and federal jurisdiction under the CWA by setting forth four categories of waters falling under CWA jurisdiction which included territorial seas, traditionally navigable waters and interstate waters; tributaries and lakes, ponds, impoundments directly or indirectly contributing surface water to traditionally navigable waters; and wetlands adjacent to these. Once again, litigation quickly took center stage. The NWPR was short-lived as President Biden’s administration sought to provide a workable, more stable definition of WOTUS and nix the never-ending uncertainty that has plagued the CWA since its inception.
The fourth and current era officially began on December 30, 2022, when the EPA and the Corps finalized the latest WOTUS rule. Under the new final rule, using the Pre-2015 Rule as a foundation, tributaries and impoundments as well as wetlands adjacent to traditionally navigable water that are either “relatively permanent” or have a “significant nexus” to traditionally navigable waters will fall under the CWA’s jurisdiction. The new rule sets forth that its “relatively permanent standard” refers to “relatively permanent, standing or continuously flowing waters” connected to traditionally navigable waters or waters with a “continuous surface connection to such relatively permanent waters.” The rule also defines a “significant nexus” as where waters “either alone or in combination with similarly situated waters in the region, significantly affect the chemical, physical, or biological integrity of traditional navigable waters, the territorial seas, or interstate waters.” Finally, the new rule states that “adjacent wetlands” are those which have a “continuous surface connection to a relatively permanent, standing or continuously flowing water” connected to traditionally navigable waters “or must either alone or in combination with similarly situated waters significantly affect the chemical, physical, or biological integrity” of traditionally navigable waters, territorial seas or interstate waters.[2]WOTUS clarity, in large part, hinges on these defined terms and the ability of these terms to be readily identified and applied.
In its release of the new rule, the EPA also published a “Fact Sheet for the Agricultural Community” which sets forth the agricultural exemptions from CWA jurisdiction and specific exclusions in the final rule. Among the exemptions are “normal farming, silviculture, and ranching activities” with examples listed; construction of farm or stock ponds or irrigation ditches and maintenance of drainage ditches; and construction or maintenance of farm roads in accordance with best management practices. Prior converted cropland also remains excluded from the final rule so long as it is available for agricultural commodity production, such as crop production, haying, grazing, agroforestry, or idling land for conservation uses.[3]
Currently, the nation awaits the Supreme Court’s decision in Sackett v. EPA, wherein the Supreme Court is asked to determine the proper test for determining which wetlands constitute WOTUS. The Supreme Court is expected to announce its decision early this spring. The anticipated ruling has the potential to affect the latest WOTUS final rule and send the EPA and Corps back to the writing room or alternatively, to affirm the appropriateness of the new rule as written. For today, a new WOTUS rule reigns. Time will tell whether the hunt for WOTUS clarity is over or whether litigation, both new and old, will keep WOTUS in the trenches
[1] See SWANCC v. U.S. Army Corps of Engineers, 531 US 159 (2001), and Rapanos v. U.S., 547 US 715 (2006).
[2] EPA, Pre-Publication Final Rule Notice: Revised Definition of ‘Waters of the United States.’” 6560-50-P (December 2022) pp. 9-10.
[3] EPA, “Final Rule: Revised Definition of ‘Waters of the United States’ Fact Sheet for the Agricultural Community December 2022.”
In a previous article, I highlighted that China’s demand for beef is breaking records and imports have increased to unprecedented levels in recent years. Since 2010, Chinese beef imports increased from about $100 million to nearly $16.6 billion by 2022 (nearly a 16,000% increase), making China the world’s largest beef importing country (Trade Data Monitor®, 2023; UN Comtrade, 2022). In years past, beef was not a major protein source in China, but economic growth and exposure to western diets has increased beef awareness. Due to several factors (higher incomes, health awareness, protein shortages due to African swine fever), Chinese consumers have diversified their diets away from pork, the traditional animal protein. Beef demand is outstripping supply in China, resulting in rising imports. As mentioned in the previous article, U.S. beef exports to China have significantly increased as a result. But how does the U.S. compare to other beef exporting countries in the Chinese market?
Figure 1 shows the value (in billions) of China’s beef imports by major exporting source: Argentina, Australia, Brazil, New Zealand, Uruguay, United States, and Rest of World. Rest of World is an aggregation of all other countries. Note that Chinese imports of U.S. beef products in 2022 were $1.7 billion, making China a leading destination market for the U.S. From the Chinese perspective, however, this was about 10% of China’s total imports, making the U.S. China’s 4th leading supplier ahead of Australia ($1.5 billion, 9%) and New Zealand ($1.4 billion, 8%). The figure shows that South American countries are more dominant in the Chinese market (Argentina – $2.5 billion, 15%; Uruguay – $1.8 billion, 11%). This is especially true for Brazil. In 2022, China imported nearly $7.0 billion of beef products from Brazil. No other country comes close (40% of China’s beef imports). What’s interesting is that both Brazilian and U.S. beef were banned in China due to animal disease issues (e.g., FMD, BSE). While the U.S. recovery since 2017 has been noteworthy, Brazil’s recovery since 2014 has been quite extraordinary.
Figure 1. Chinese beef and beef product imports by exporting source: 2010-2022
Muhammad, Andrew. China Emerges as a Leading Destination for U.S. Beef Exports. Southern Ag Today 2(49.4). December 1, 2022. https://southernagtoday.org/2022/12/china-emerges-as-a-leading-destination-for-u-s-beef-exports/
The beginning of the year marks the start of female and bull buying decisions for producers in the southern states. Whether a producer is selecting for Continental, British, American, or a combo of the three, this publication serves as a reminder of the foundation traits to manage for this buying season. Foundation Traits refer to Stayability, Fertility, Structural Soundness, Udder Quality, Disposition, Adaptability and Maintenance, and Index Selection. Selecting cattle based on these traits can increase the likelihood of the operation being profitable in the short and long term. Below is a description of three of these traits.
Stayability: a cow’s ability to remain in the herd past its “break-even” point is determined by multiple traits. The all-encompassing phenotype that is recorded by many breed associations is called Stayability (STAY). Stayability measures the likelihood that a bull’s daughters will remain in the herd long enough (typically 6 years old) to recoup their development and maintenance costs if they breed on time.
Fertility: In concert with Stayability, maintaining fertile females and keeping daughters out of bulls that are fertile is critical to the herd’s profitability. Failing to rebreed is the most common reason cows are culled from herds. That said, a surprising number of cows get a second chance when open. The extra feed and variable costs required to maintain that cow will hinder the profitability of the operation if it stays in the herd. When a cow misses a calf, it does not become profitable until year 7 or 8, depending upon calf prices. If a cow misses twice, it does not become profitable until year 11. Thus, while it is possible for cows that miss a calf to be profitable, it takes more years to realize that profit, which makes fertility a critical financial driver.
Structural Soundness: Cattle must have good feet and leg structure to graze, travel, and breed, and the discomfort of poor feet and leg structure reduces the time they spend grazing or drinking. Besides directly impacting performance, it creates animal welfare issues. Hoof trimming and other management interventions may prolong an unsound cow’s productive life, but these are likely to incur costs and significant additional labor. Figure 1 displays scores for foot, claw, and side leg.
Figure 1. Phenotype scoring scales for foot angle (top), claw set (middle), and side leg profile (bottom). A score of 5 is the most desirable for all three scores.
Image courtesy American Simmental Association
The impacts of foundation traits on cowherds reach far beyond making a producer’s life easier. Many of these traits have direct costs that impact the bottom line, while others add labor. This additional labor often is confused with convenience, but its actual financial cost is often undervalued or completely ignored. A producer’s time is worth something! Depending upon a producer’s breeding and calving seasons, the cost of spending additional time or incurring additional variable costs affects the operation’s profitability and efficiency. A more in-depth description of the foundation traits can be found here.
