Kentucky Beef Cattle Market Update

– Dr. Kenny Burdine, Livestock Marketing Specialist, University of Kentucky

While the word recovery is not appropriate, there are a few encouraging signs in the cattle market.  Feeder cattle futures have gained around $10 per cwt from their mid-October lows.  Kentucky calf markets, which usually make their lows around this time of year, have gained ground similarly over the last few weeks.  Just the fact that the downtrend has been broken provides some room for optimism.

I have been saying that I thought the cowherd would be larger when the numbers came out in early 2017.  I still expect this to be the case, but would also point to some signs that things are changing quickly.  Most notably, I would point to increases in both beef cow and heifer slaughter, especially in the second half of 2016.  Both signs suggest herd expansion is slowing and I am including both charts this month for clarity.

As always, I want to dig a bit further into the details.  When examining these trends compared to year-ago levels, it is crucial to understand that the cowherd grew by 3.5% last year, so simply comparing female slaughter this year to last year, on a percentage basis, is not sufficient to understand what is going on as last year was a year where large inventory increases were seen.  Through October, beef cow slaughter was up almost 12.8% from 2015, which is an increase of 228 thousand head.  Meanwhile, heifer slaughter was up 2.1%, which is an increase of 171 thousand head.  To put this in perspective, USDA’s estimate for the increase in beef cow inventory during 2015 was a little over one million cows.  So, while the increase in female slaughter is significant, I don’t think it is yet sufficient to suggest that beef cow inventory is likely to decline.

With the lower calf prices, I am getting a lot of questions about heifer development.  And, in many cases, I can see where culling hard and holding back more heifers may make good sense.  This would start positioning the cow-herd for larger inventory in 2-3 years.  Some are also looking at the current bred heifer market similarly.  I wanted to make everyone aware of a decision tool that Greg Halich, Samantha Kindred, and myself put together last fall that helps to examine the profitability of breeding stock given the price of bred heifers, their expected productivity, estimated cost of production, and reasonable estimates for long-term calf prices.  That excel based decision tool, the Bred Heifer Profitability Estimator, can be found at this link:


Source: USDA-AMS & USDA-NASS, Livestock Marketing Information Center


Source: USDA-AMS & USDA-NASS, Livestock Marketing Information Center