– Dr. Kenny Burdine, Livestock Marketing Specialist, University of Kentucky
It was another light week in terms of marketing in KY and this has largely been the case since the end of March. This really is a trend industry-wide as feedlot placements and cattle slaughter are both running well below expected levels. Several processing plants have announced temporary closures and a lot of others are running at reduced capacity, likely to take measures to reduce the likelihood of closure in the future. Of course, there are significant incentives for processing plants to resume operations as soon as they practically and safely can. It was inevitable that cattle would back up in the system as COVID-19 impacts lingered, but the longer it continues the more it will stretch out the length of the recovery. This is definitely something to watch in the coming weeks.
As I write this on Friday April 17th, CME© feeder cattle futures are about where they ended last week. Fall contracts are actually a little higher and have moved into the low $130’s per cwt. For the current week, the price of an 850 lb M/L #1-2 steer at Kentucky auction markets fell by about $1 per cwt. Calf prices improved slightly with the price of a 550 lb M/L #1-2 steer increasing by about $3 per cwt. Both series can be seen in figure 1.
Source: USDA-AMS, Livestock Marketing Information Center, and Author Calculations
Cull cow and slaughter bull prices were stronger this week. This was actually the first weekly increase in cull cow prices since the end of March. The state average price for 80-85% boning cows increased by nearly $6 per cwt and is now in the mid-$50’s (see figure 2). Cull cow prices typically make their highs in May or June. I’ve almost quit comparing prices to year-ago levels, but did notice that current cull cow price is actually about $8 per cwt higher than this time last year. There is typically some flexibility on the timing of moving cull cows this time of year with spring grass coming on.
Source: USDA-AMS, Livestock Marketing Information Center, and Author Calculations
A lot of fall calving herds are weaning calves around this time and those calves are selling for more than $100 less than I would have predicted at the first of the year. The price impact per head is likely even greater on heavy feeder cattle – I’d probably put it somewhere in the $125-$175 per head range. These are significant hits to incomes that will not be easy to recover from. Producers should also keep an eye out for any announcements from USDA about any direct payments to cattle producers from the CARES Act that may help offset a portion of these losses.