– James Mitchell, Livestock Marketing Specialist, University of Arkansas

Last week USDA-NASS published their 2021 Crop Production Summary. The report includes information about U.S. hay production and December 1 hay stocks. USDA splits hay data into two categories, alfalfa and all other hay. All other hay is the relevant category for the Southeast.

All other hay production totaled 70.951 million tons in 2021, down 3.8% from the prior year. Several southern states had year-over-year declines in hay production. All other hay production declined Continue reading Hay Production and Prices →

– Kenny Burdine, Livestock Marketing Specialist, University of Kentucky

From my perspective, cow-calf operators have been as frustrated over the last couple of years as I have ever seen them. Several commodity markets improved a great deal during 2021, but the improvement in calf prices was pretty minimal. In reality, the cow-calf sector has been handed 4-5 consecutive challenging years. Fundamentals appeared to be setting up for price improvement two years ago, but between COVID in 2020 and sharply higher grain prices in 2021, calf markets have struggled to gain any traction at all. I remain bullish on the 2022 market and think we will see our best spring calf market since 2016, but unknowns always exist. So, I wanted to focus this week’s discussion on three key questions that I think will drive this year’s calf market.

How high will fed cattle prices go?
Fed cattle prices typically make their highs in the spring of the year and move downward through summer and fall. Last year, slaughter cattle prices improved by about $17 per cwt from early October to early December, but did pull back a bit as we moved through December. As I write this on the morning of January 10^th, April CME© Live Cattle futures are on the board above $140 and the break to Continue reading Three Questions for the 2022 Cattle Market →

– Garth Ruff, Beef Cattle Field Specialist, Ohio State University Extension

What is driving recent cash fed cattle higher prices at auction? What is the cattle market going to look like in 2022?  Those have been common questions as of late, especially after record setting fed cattle auction prices during the first week of December at several Ohio auction markets.

Auction Price Dynamics

As we know in agriculture, the law of supply and demand still has a great impact on commodity prices. Let’s talk about demand first.

We often do not know, especially with regards to fed cattle is the balance between supply and demand of a given packer on a given harvest day. For a plant to operate efficiently, it needs to operate at capacity to cover fixed costs associated with daily operations.

From the supply side of things, most packers fill a day’s harvest with a combination of cattle that are forward contracted, negotiated or formula priced, and cattle purchased on the cash market. Depending on where, and who the packer is, the ratios between the three purchasing avenues will vary greatly.

Without getting too into the weeds on how cattle are scheduled for harvest, one can deduce that if the supply of contracted or negotiated price cattle is limited, there is a need to purchase fed cattle on the cash or spot market.

When more than one packer at an auction is caught short handed on supply, the need to fill Continue reading Questions a Plenty Going Forward →

– Josh Maples, Assistant Professor & Extension Economist, Department of Agricultural Economics, Mississippi State University

Cattle markets finished 2021 on a much stronger note than in the past few years. Optimism for higher prices in 2022 has been building for months and market activity over the past few weeks has only added to that optimism.

Using a simple average of the weekly 5-area averages, fed cattle prices averaged about $138 per cwt in December 2021 (the full monthly weighted average report hasn’t been released yet and could be a little different). This is sharply higher than the monthly weighted average for December 2020 which was about $108 per cwt. For reference, there has been only one month (May 2017) that topped $138 since mid-2015.

Cattle futures contract prices for 2022 traded on CME reflect the optimism for higher prices. Live cattle futures quotes are around $144 per cwt for April and $138 for the June and August contracts. Feeder cattle futures prices are also much stronger with spring contracts in the mid $170 range and summer contracts topping $180 per cwt.

The start of a new year is a good time to consider risk management opportunities that might be Continue reading Cattle Markets in 2022 →

– Matthew Diersen, Risk & Business Management Specialist, Ness School of Management & Economics, South Dakota State University

During December of 2020 the price for 500-600 pound steers in South Dakota briefly averaged above $190 per cwt for a couple of weeks, a level last observed in early 2016. The value of calves depends on the expectations for their ultimate value as finished animals. Thus, the price of calves expected in 2022 depends on where the trade thinks the price of fed cattle will be in mid-2023. The LMIC projections have the price of fed cattle higher in 2022 than in 2021 with a further increase expected in 2023. That bodes well for calf price expectations and the LMIC projections are for higher calf prices in 2022, but prices can still fluctuate.

There are several ways to transfer the risk of changing prices partially or fully to other market participants prior to the typical time of year when calves are sold (often November in the northern plains). A common way to transfer some risk is to use forward contracts – selling calves for delivery at a later time. Those are uncommon until late spring and early summer. Until then, the futures and options markets are more likely choices. Livestock Risk Protection (LRP), price insurance, is Continue reading Pricing Calves →