Two key reports were released on Friday that give the latest insight on the herd dynamics for beef cattle. USDA-NASS released the mid-year Cattle report and the monthly Cattle on Feed report. While there is plenty to digest in each report, I wanted to note a few key points from each report in this article.
For the mid-year Cattle report, two of the most interesting estimates were the number of beef heifers held for replacement and the 2023 calf crop. NASS estimated 4.05 million beef heifers held for replacement, a 2.4 percent decrease from the 2022 estimate. The 2023 calf crop is estimated to be 33.8 million head (a 1.9 percent decline from 2022) and includes 24.8 million for the first half of the year and 9 million calves to be born during the second half of the year. This is the fifth consecutive annual decline in calf crop and would be the lowest total since the 33.5 million total in 2014.
For the Cattle on Feed report, one of the most interesting points was an estimate that didn’t change from a year ago. The number of heifers on feed was estimated at 4.47 million head which is unchanged from a year ago, even though the tightening calf crop the past few years implies the total number of heifers has declined. For comparison, the number of steers on feed was estimated at 6.73 million head which was a 2.9 percent decrease from 2022. Heifers were estimated at 39.9 percent of cattle on feed, the highest percentage since 2002.
Contraction in the beef cattle herd continued through the first half of 2023. Beef cow numbers are lower, the calf crop is lower, and many heifers continued to enter feedlots instead of being held for replacement. Beef cattle prices are at record highs which has many folks wondering when herd expansion will follow. However, the signs of expansion are not evident yet.
The Black Sea Grain Deal made it possible for Ukraine to continue to ship goods amid the Russia-Ukraine conflict. On August 1, 2022, five months after the Russian invasion of Ukraine, the first Ukrainian grain ship left the port of Odesa, marking a time when Ukraine safely exported grain, fertilizer, and other products. On July 17, 2023, nearly a year after its implementation, Russia left the deal and will no longer abide by the rules set in place by the Black Sea Grain Deal. We look at which agricultural markets will be impacted and provide implications for each market.
Ukraine ranked 3rd among global competitors for corn exports but is projected to fall to 4th in the 2023/2024 marketing year while ranking 7th in production (USDA-FAS, 2023). Ukrainian corn exports accounted for 15% of global exports in the 2022/2023 marketing year and are projected to drop to 9.6% in the 2023/2024 marketing year (Figure 1). Despite Ukraine’s relatively high ranking in the corn export market, global ending stocks are projected to increase from 11.71 billion bushels to 12.36 billion bushels, carried by a projected record production of 15.27 billion bushels in the United States. Russian corn exports accounted for a smaller portion of total exports at 2.4% of global exports during the 2022/2023 marketing year, with corn exports projected to fall to 2.1% of global exports in the 2023/2024 marketing year.
The top 3 wheat exporters in the world are Russia, the European Union, and Canada, while Ukraine ranks 7th among global competitors (USDA-FAS, 2023; Figure 2). Ukrainian wheat exports accounted for 7.5% of global exports in the 2022/2023 marketing year and is projected by USDA to drop to 5.0% in the 2023/2024 marketing year. Russian wheat exports accounted for 21% of global exports in the 2022/2023 marketing year and is projected by USDA to increase to 22% in the 2023/2024 marketing year.
According to the Food and Agricultural Organization, Russia ranks 1st, 2nd, and 3rd in Nitrogenous, Potash, and Phosphate fertilizer exports. At the same time, Ukraine only accounts for 2% of Nitrogenous exports and a smaller amount of Phosphate and Potash fertilizers. Fertilizer prices increased at the start of the Russian-Ukraine conflict due to Russian supply shocks. Russia’s exports and production are expected to be uninhibited by the Black Sea deal. The same holds for Russian ally Belarus, the third largest global potash exporter behind Russia and Canada.
The initial cancellation of the grain deal on the 17th did not significantly affect futures as the market likely already accounted for the cancellation. We saw a small rally in the futures prices for corn, soybeans, and soft red winter wheat that returned to market-open price levels by market close. However, Russia escalated Ukrainian export problems on July 18th by launching a missile strike on the Port of Odesa. Some reports indicate that critical port infrastructure was destroyed, and Russia is trying to stop grain exports (Reuters & The Hill, 2023). Continued attacks on Ukrainian ports could cause supply shocks, increasing the volatility of markets speculating on U.S. crop conditions and weather. Combining the recent missile strikes with a fall in forecasted July precipitation, the harvest-time futures price of corn and wheat have increased by $0.40 and $0.70, respectively, as of July 19th. Recent gains in wheat prices are likely due more to the Ukraine/Russia situation than weather while corn is a combination of both. Moving forward, markets will likely be affected by the Russian/Ukrainian conflict, weather, and crop conditions, increasing price volatility.
Approaching harvest 2023, producers should take advantage of relatively higher corn prices now, before the weather risk premium associated with speculation on weather and crop conditions reduces to zero. As September approaches and winter wheat harvest progresses, the wheat price typically falls due to an influx of market supply and rebounds after the glut of harvest supplies exits the market.
Figure 1. Global Corn Exports by Country (Marketing Years 2019/2020 to 2023/2024)
Figure 2. Global Wheat Exports by Country (Marketing Years 2019/2020 to 2023/2024)
Farming is not for the faint of heart. Farmers and farm families work long hours and face uncertain weather, input costs, and prices.
The mission of Cooperative Extension includes supporting farmers and their families through research-based information and programming on agriculture and natural resources, child development, community development, and health. University of Georgia Extension is taking a holistic next step, by supporting farmer and farm family emotional health in addition to economic and physical health, through a new Behavioral Health Team (BHT).
The BHT includes Extension Specialists with expertise in childhood development, mental health, family relationships, substance misuse, women and veteran farmers, and stress and coping. It provides training and consultation on behavioral health topics to both Extension staff and to communities.
One specific BHT initiative is the Farm Stress Production Meeting model, which infuses information on stress and coping into existing Extension production meetings. 300+ farmers have participated, and evaluation shows a significant shift in farmer attitudes towards stress. Two conferences, a Farm Stress Summit and AgrileadHer have provided information and virtual support on stress and coping to several hundred participants. Informed both by messaging research with growers and focus groups with farm wives, we have created fresh informational materials about farm stress and coping. A new blog, Thriving on the Farm, reinforces these messages through weekly posts about stress and coping.
The BHT is another way Extension is committed to sustaining farms—by sustaining farmers—because a farmer is the most important asset of their farm.
In previous updates, we have talked about the likelihood of Congress passing a new farm bill “on time” which means by September 30th of this year. Through the middle of July, neither the House nor the Senate agriculture committee leadership have released their farm bill drafts. If they don’t release their drafts next week, it appears that this will likely happen during the August recess or when they return in September.
Looking at the calendars for both the House and Senate indicates the Senate is in session 17 days in September and the House is in session 12 days. While we are certain getting the entire farm bill completed by September 30th would be welcomed by House and Senate agriculture committee members and staff, we feel that a more realistic goal would be to have bill completed before the members leave for the Christmas holidays. The Senate is in session 44 days from October to December, while the House is in session 24 days during that period.
Getting the farm bill completed by the end of the year would still be considered somewhat of a surprise as, to date, there hasn’t been a significant new source of funds provided to agricultural committee leadership to develop the new farm bill. During farm bill hearings in both the House and Senate this spring and summer, the near unanimous request by commodity groups testifying was for higher reference prices that would protect a meaningful amount of their production costs. Our estimate is that a 20 percent increase in reference prices for all 23 covered commodities will cost between $55 and $60 billion over 10 years. The increase doesn’t have to be for all covered commodities nor does it have to be the same percent for each commodity, although doing so might be politically easier.
In forage production, whether that is establishing a forage system or simply maintaining it, it is important to understand what costs are involved and how these can impact your break-evens. A break-even is the price/yield needed in order to cover your total costs. Depending on the type of forage system you have, the costs can be relatively expensive. Developing an enterprise budget is one way of examining and comparing these costs.
Figure 1 shows the costs per acre from forage enterprise budgets developed at Mississippi State for four different forage maintenance systems: 1) conventional alfalfa hay, 2) permanent summer pasture, 3) mixed grass hay, and 4) hybrid bermudagrass hay. The conventional alfalfa and the hybrid bermudagrass systems had the highest costs per acre at $957.63 and $954.22, respectively. Permanent summer pasture maintenance had the lowest costs per acre at $282.24/ac. Fertilizer, herbicide, and machinery costs make up a large portion of the costs in each system. Machinery costs include fuel, repair and maintenance, and interest costs.
Figure 1. Costs per acre for forage maintenance production systems in Mississippi
Figure 2 shows the break-even curves for each of the four forage production systems. Break-even curves show the price and yield needed to cover total specified expenses. Price/yield combinations below this curve would result in losing money, and any combination above the curve would generate a profit. The market price shown in the figure was the average hay price received by producers in Mississippi for 2022 at $126/ton. Hay prices and costs can vary significantly from state to state, so again, it is important to adjust for your situation. However, the basic idea is that production systems with higher costs need a higher price, yield, or both to be profitable. For example, at the Mississippi 2022 market price and assumed costs, a permanent summer pasture system would need to produce 2.2 tons/ac to break-even. A mixed grass hay system would need 4.9 tons/ac to break-even. A conventional alfalfa hay system and a hybrid bermudagrass hay system would each need to produce around 7.6 tons/ac given a price of $126/ton. As such, permanent summer pasture and mixed grass hay are two of the more popular forage systems in Mississippi.
Figure 2. Forage maintenance break-even curves in Mississippi
More information on these costs, as well as over 20 additional forage maintenance and establishment budgets for Mississippi, can be found at: https://www.agecon.msstate.edu/whatwedo/budgets.php. It is important to determine what your specific costs are, and these can vary significantly from state to state and by production system. Below are links to enterprise budgets developed by agricultural economists for each state in the Southern Region.
