Beef cow culling normally peaks in the Fall and this year has been no exception to that. The big surprise is just how big culling has been this Fall given a smaller cow herd. Several reasons are probably combining to keep culling high. Drought in many areas, including the South, high cull cow prices, and high hay costs. Grabbing the high cull cow price today looks better than the future net returns from keeping her for another calf.
For the year, U.S. beef cow slaughter is 11.6 percent, or 424,000 head, smaller than last year. But, over the last 6 weeks beef cow slaughter has only been 2.4 percent below last year. Culling for the week ending November 18th, at 83,200 head, was actually larger than the same week the year before and was the largest week in 2023. Any week with slaughter over 80,000 head is a big week.
The national slaughter data masks some regional differences over the last few weeks. Beef cow slaughter in the South, Region 4 in the federally inspected slaughter data, was 2.6 percent larger than the year before. Drought is likely a factor in culling in this region. Region 6 slaughter, which includes Texas, Oklahoma, Arkansas, and Louisiana, was 8.5 percent smaller than last year over the same period. Much of the Corn Belt region also had cow culling above a year ago.
Reduced dairy cow slaughter has kept total slaughter well below last year over the last few weeks which has worked to boost cull cow prices. The normal Fall decline in price appears to be over with auction prices increasing from about $70 per cwt to $87 per cwt into mid-December.
The next weeks will be shortened due to the Christmas and New Year’s holidays. Early in January cow slaughter tends to jump higher led by more dairy culling. Overall, culling should continue to shrink in 2024 with higher cull cow prices.
Merry Christmas from the livestock economist gang at SAT!
Marketing plans are typically made up of two parts: pre-harvest marketing, in which producers market the crop prior to harvest, and post-harvest marketing, in which producers sell bushels during harvest or unmarketed bushels in storage after harvest. In this article, we discuss how historical pre-harvest price movements can be used as a guide for producers when creating their pre-harvest marketing plans. Figures 1 and 2 contain boxplots that show the distribution of historical percent changes in the harvest-time futures prices for soybeans (November contract) and corn (December contract) from December to each subsequent month using data which spans from 2009-2023. Boxplots are helpful as they allow us to analyze the seasonality of prices and the associated price volatility across the year. In the boxplots, the X represents the average November soybean contract price percent change from December to the corresponding month. The bottom whisker represents the lowest 25% of price changes, the box represents the next 50% of price changes, and the top whisker represents the highest 25% of price changes. The line separating the box represents the median; 50% of observations lie below, and 50% lie above. The black dots represent outliers, values at the extreme end of the data.
Figure 1 indicates that the highest average soybean price occurs in July, where the price is approximately 5% higher than in December; however, the median is approximately 0%, indicating that the price is only higher 50% of the time. On the contrary, the month of June has a slightly lower average price increase at 4%, but less downside risk. An interesting result for soybeans is the outliers in February and March, corresponding to the Brazilian soybean harvest window. We hypothesize that Brazilian crop or harvest issues can provide U.S. soybean producers with opportunities to market grain crops at abnormally high prices with respect to the December price.
Figure 2 indicates the summer months again provide the highest average corn price change, with June being the highest on average. We again find that with higher price potential comes more price variability. The May and June median price changes are near 0%, indicating equal upside and downside price risk. After June, the median becomes more negative, indicating that prices are likely to drop with expected new crop production. In May, the upside price potential ranges from 0% to 35%, while the downside ranges from 0% to -15%.
Figures 1 and 2 put price risk in perspective as it pertains to pre-harvest marketing plans. On average, prices are higher in the summer than in December; however, these higher prices carry a significant amount of downside risk. For example, if a producer is trying to decide if they should market corn in May. The boxplots would indicate that if the price is 15% greater than the December price, price movements have been greater than at least 75% of price movements historically. Creating a solid signal to lock in the higher price. These charts may also indicate the usefulness of option contracts, such as establishing a futures market price floor through purchasing a put option or building an option spread strategy. The summer months have wide trading ranges, by using an option producers can lock in a price floor but leave themselves open to upside potential.
As a lawyer at the National Agricultural Law Center, I don’t represent clients. While I- and my colleagues- give presentations about legal issues across the country, we’re prohibited from giving legal advice specific to one person’s situation. But there are many cases where that’s exactly what people ask for- an attorney who can represent their legal interests for the issues they’re facing. When I get that question, here are some suggestions I give:
The legal issue you’re facing is going to influence the lawyer you’re looking for. For many things, such as real estate, contract work, zoning changes, or basic business planning, a local attorney who may not always work with farmers may still be the best person for the job. They’ll be convenient and knowledgeable about the administrative and court systems in your area. However, for some issues, like crop insurance claim denials, NRCS determinations or ag bankruptcy, it might be better to work with an attorney who is more familiar with the tiny details and pitfalls that make up that area of practice.
In order to practice law, attorneys have to be a member of either their state bar or bar association. Many of these have a function on their website allowing people to search for members. Some search only by geography, so you can find lawyers close to you. Others also allow searching by practice areas, which will help narrow your search to firms that work with real estate or contracts law, for example. Further, some state bars have a referral service that can connect you with an attorney who practices in your area of need, while also requiring the attorney to charge a lower-cost initial consultation fee. The NALC has created a resource with links to these websites for each state.
You can also search for professional organizations in the relevant area of law. Many state bar associations have “sections,” joined by attorneys with similar practice interests. The NALC resource can also help you identify active sections. Additionally, there are nationwide organizations that have similar goals, some with a searchable membership directory. For example, I’m a member of the American Agricultural Law Association, which focuses on areas of law that intersect with agriculture, and a membership list is available here.
If finances are a significant concern, there are a few options available. It’s important to note, however, that these organizations are frequently overwhelmed with requests and sometimes limit their acceptance to certain legal issues, financial status or other criteria. With that being said, many areas have Legal Aid offices that provide legal services to low-income families. Search for your county or city name and “Legal Aid” to find one near you. Additionally, some law schools have clinics where students work with licensed attorneys to help a limited number of individuals in certain situations, such as bankruptcy, immigration, or business formation and development. Search for the name of the law school nearest you plus the word “clinics” to find out if that might be an option. Finally, the American Bar Association has a service called Free Legal Answers where pro bono attorneys provide legal advice in certain subject areas.
Finally, don’t discount the benefits of asking your friends and neighbors if they have an attorney they work with. If that doesn’t work, every town in the country (at least that I’ve been to!) has a small restaurant where farmers meet in the mornings, visit and exchange local “news.” Stop by, have a cup of coffee and talk with them for a bit about who they recommend. Be sure to try the pie!
If you were following farm bill developments over the past year, chances are you’ve heard a lot of chatter about the Inflation Reduction Act (IRA). The IRA—signed into law in August 2022—provided approximately $18 billion in new, additional funding for climate-smart agriculture delivered via the existing conservation programs authorized in Title 2 of the farm bill. But, what does that have to do with the farm bill reauthorization? As it turns out, quite a lot.
While the IRA infused $18 billion into the conservation programs, it was one-time funding. The IRA passed through Congress under a budget process known as reconciliation. While that process lowers the vote threshold in the Senate—allowing bills that might not otherwise pass to find their way through the process, typically in partisan fashion—it also requires that no spending extend beyond the 10-year budget window in the reconciliation agreement. For the IRA, that window closes in 2031. Contrast that with the farm bill, where the budget for conservation programs is assumed to continue in perpetuity.
While the debate over the IRA has largely involved (1) quibbling over CBO’s projections of IRA spending and (2) speculating if USDA will be able to obligate the entire $18 billion by 2031, both of these arguments miss the bigger point. Absent creative thinking, the IRA funding will be a one-time flash in the pan—gone by 2031—as noted in Figure 1.
Figure 1. Historic Conservation Spending with Estimated Spending under Current Law
Sadly, like most debates in Washington, D.C., creativity often takes a backseat. The same is true of this debate. Much of the conversation has focused on the fringe options: (1) doing absolutely nothing, despite the caution above and (2) clawing back all of the IRA funding and using it to fund deficit reduction. We don’t see either of these as viable—or likely—options. In the remainder of this article, we explore the middle ground: options that deviate from the status quo but that could result in permanent increases to conservation funding.
As noted above, the farm bill differs from the IRA in that the budget for conservation programs in Title II of the farm bill is assumed to continue in perpetuity. The options that follow all involve reallocating the IRA funding within the context of the farm bill. It is complicated to be sure—and would require navigating arcane budget rules—but it is possible and would ensure that elevated funding levels for conservation extend beyond the life of the IRA. To illustrate the point, the gray area from Figure 1 is simply reallocated (in a nearly linear fashion) in Figure 2. A few key observations from this hypothetical reallocation:
This option results in additional conservation funding beyond 2031, which is not an option under status quo;
By CBO’s estimates, the IRA will result in Title II outlays reaching a maximum of $9 billion in FY2027 (Figure 1), while the hypothetical reallocation option presented in Figure 2 would reach $9 billion by 2033; and
Perhaps most importantly when compared to status quo, this option would result in these elevated levels in perpetuity. In other words, rather than reaching $9 billion for a single year, it’s possible to build a Title II baseline at $9 billion per year in perpetuity.
Importantly, this example is hypothetical. The faster USDA obligates the IRA funding, the less there is available to build long-term baseline in a farm bill. In other words, the longer this drags on, the less opportunity there is to have a long-term impact. Regardless, while this option would trim IRA spending in the near term, it would result in permanent additional baseline to Title II of the farm bill going forward.
Figure 2. Historical Conservation Spending and Hypothetical Reallocation of IRA Dollars
Of course, Congress is under no obligation to follow the hypothetical allocation presented in Figure 2. The IRA was a one-time agreement strictly limited to $18 billion. If policymakers agree to a solution that allows for a permanent increase in Title II spending—particularly those who were opposed to the IRA in the first place—then it stands to reason that compromise may be required. For example, some of the gray area in Figure 2 could be allocated to fund other priorities in the farm bill. While some may be naturally opposed to this option, it could still result in long-term investments to Title II that dwarf the IRA funding.
Where does that leave us? Supporters of status quo (i.e., those demanding that the IRA not be brought into farm bill discussions) are guaranteeing that no more than $18 billion will be added to Title II programs for carrying out climate-smart agriculture (at least not in the near term, given the political environment that appears against more spending). While it would require some very difficult conversations about priorities and funding levels, to us this seems to present a win-win opportunity…but only if cooler heads can prevail.
As we open the final month of the year, most spring-calving cow-calf operations have weaned calves and have an opportunity to assess the productivity and profitability of their herds. To that end, I wanted to quickly review two measures that I feel are of utmost importance to a cow-calf operator. Neither measure carries a dollar sign, but both have serious implications for the revenue side of the profit equation. There is no shortage of measures and indices that can be helpful for cow-calf operators, but weaning rate and pounds of weaned calf per cow are two that I think are very important, but also relatively simple to understand and calculate.
Weaning rate is the percentage of cows exposed to a bull that wean a calf in a given year. If a farmer exposed 50 cows and weaned 45 calves, the weaning rate for that operation would be 90% (45 calves divided by 50 cows). There is a cost to maintaining and breeding cows whether they wean a calf or not, so limiting the number of cows that incur costs and fail to wean a calf is crucial. Holding all other things constant, herds with higher weaning rates will be more profitable than those with lower weaning rates. If weaning rate is an issue, farmers should work to determine if the issue is cows failing to breed, cows losing calves, or calf survival.
An easy way to think about weaning rate is that it converts revenue per calf to revenue per cow. Table 1 below provides a simple way to illustrate this concept. If one assumes that the average calf is weaned at 550 lbs and is worth $2.30 per lb (for simplicity think steer-heifer average), then the value of each calf is $1,265 at weaning. However, when discounted for cows that were maintained but did not wean a calf, the revenue picture on a per cow basis is very different. Each 5% change in weaning rate impacts revenue per cow by more than $60. That difference expands in strong calf markets and contracts in weaker calf markets, but the fact that weaning rate significantly impacts profit is undeniable.
The second measure that I wanted to briefly discuss is pounds of weaned calf per cow. This measure builds upon weaning rate by also including weaning weights. Pounds of weaned calf per cow can be calculated by dividing the total number of weaned lbs by the number of cows exposed to a bull or by multiplying the average weaning weight for the operation by the weaning rate. I like to think of pounds of weaned calf per cow much like a yield measure for a crop operation – production per unit. Weaned lbs are the production level, and cows are the unit. So this measures the lbs of weaned calf a cow-calf producer can potentially sell for every cow he or she maintains.
Table 2 shows pounds of weaned calf per cow for a range of weaning rates and weaning weights. Increasing the percentage of cows that wean a calf each year and / or increasing the weaning weight of calves are two of the primary ways that cow-calf operations can see increased revenues, with calf price being an important third factor. The wide range across the table speaks to how much this measure can vary across operations. This is not to say that a higher level of lbs of weaned calf per cow is always desirable because this measure does not incorporate any additional costs associated with higher weaning weights or other considerations of the operation. But, tracking and managing that number will have profit implications for the operation over time.
Table 1: Revenue per Cow as Weaning Rate Changes
Assuming 550 lb calves @ $2.30: $1,265 per calf weaned
Weaning Rate
Revenue per Cow
95%
$1,202.75
90%
$1,138.50
85%
$1,075.25
80%
$1,012.00
75%
$948.75
Table 2: Pounds of Weaned Calf per Cow by Weaning Weight and Weaning Rate
