– Dr. Kenny Burdine, Livestock Marketing Specialist, University of Kentucky
After a very frustrating fall, the calf market is showing some signs of life. To start the new year, 550 lb steers calves traded $12 per cwt higher in January than they did in November (see figure 1). This is by no means a great market, but enough to create some optimism for spring. Excessive rains continue to create challenges across the board and the market seems to consistently discount green calves that are likely perceived as high risk placements in this type of weather. Heavy feeder cattle prices have pulled back some from fall, but that is a typical seasonal pattern and I expect their prices to improve through the year.
Figure 1. 550 lb Medium / Large Farm #1-2 Steers
KY Auction Prices ($ per cwt)
Source: USDA-AMS, Livestock Marketing Information Center, Author Calculations
Late January brought USDA’s annual cattle inventory estimates, which confirmed that the size of the beef cow herd was smaller to start 2020. The size of the decrease actually exceeded trade expectations, with beef cow numbers down a little over 1%. I think the primary driver of the decrease was high beef cow slaughter in 2019, which was up 5% for the year and over 14%f or the 4th quarter. Also not surprisingly, heifer retention was also down (-2%), which is consistent with low margins at the cow-calf level. The key takeaway from the report is that the cowherd is finally decreasing in size and calf crops should continue to get smaller, which is exactly what our calf market needs. US beef cow inventory from 1950 to 2020 is shown in figure 2.
Figure 2. US Beef Cow Inventory (1950 to 2020)
Source: USDA-NASS and Livestock Marketing Information Center
Frankly, I was surprised by USDA’s estimate of Kentucky beef cow numbers as they were estimated to be up very slightly from 2019. Given the number of cows that moved through auction markets in fall of 2019, I fully expected Kentucky beef cow numbers to be lower. There are eight states in the US with more than one million beef cows. Beef cow numbers were estimated to be lower in six of those states: Texas, Oklahoma, Montana, Nebraska, South Dakota, and Kansas. Only Kentucky and Missouri were estimated to have more cows to start 2020 than they did in 2019.
A smaller cowherd at the national level, combined with considerable optimism with respect to export markets, paints a much more optimistic picture for prices in 2020. As is always the case, I expect calf markets to improve considerably between now and spring. An additional price improvement of $15-$20 per cwt would not surprise me at all. As we start thinking about spring born calves, I do expect a better fall market than was seen last year. My initial guess would be that calves will sell for $10-$15 more per cwt than they did in fall of 2019.
The full USDA report can be accessed at: https://downloads.usda.library.cornell.edu/usda-esmis/files/h702q636h/rb68xv24k/76537h73d/catl0120.pdf