– Dr. Kenny Burdine, Livestock Marketing Specialist, University of Kentucky
As is often the case, an extremely wet start to the summer has given way to much drier conditions. While most Kentucky producers would not describe their situation as a drought, many would welcome some moisture to keep pastures growing. As I write this article (July 16, 2019), CME© feeder cattle futures had fallen by nearly $20 per cwt from their spring highs. As has been the case all summer, heavy feeder cattle prices in Kentucky have held reasonably well given the drop in futures with groups of 8wt steers trading in the upper $130’s and $140’s. Calf prices have fallen by roughly $15 per cwt from their April highs and are currently moving in the mid-$140’s.
In terms of market drivers, both trade concerns and rising grain prices continue to dampen cattle markets. Ample beef supplies and less than ideal summer grilling weather has also not helped box beef movement through summer. And, not surprisingly, on-feed inventory has continued to grow with the size of recent calf crops. All in all, 2019 has really set up for a frustrating year across the board for the cattle complex.
While spring appeared to offer relatively attractive stocker margins, the decline in fall futures has greatly moderated those profits levels unless producers priced cattle at, or shortly after, placement. This was really the focus of my article last month as the market did offer stocker operators some opportunity to price in a profit.
Unless something drastically changes in the calf market between now and fall, things won’t look any better for cow-calf operations. A 550 lb steer price in the $140’s and heifer price in the $130’s will leave revenues per cow between $600 and $700 after accounting for weaning rate. When considering cash costs, breeding stock depreciation, and overhead on most operations, return to land and capital are unlikely to please many producers. At a minimum, this should mean that we are nearing the end of the expansion phase of this cattle cycle.
Figure 1. 550# Medium & Large Frame #1-2 Steers
KY Auction Prices ($ per cwt)
Source: USDA-AMS, Livestock Marketing Information Center, Author Calculations
Figure 2. 850# Medium & Large Frame #1-2 Steers
KY Auction Prices ($ per cwt)
Source: USDA-AMS, Livestock Marketing Information Center, Author Calculations