National Use of Livestock Insurance Products Offered by USDA-RMA

– Elliott Dennis, Assistant Professor & Livestock Extension Economist, Department of Agricultural Economics, University of Nebraska – Lincoln

EDITOR’s NOTE: Beyond what you find in this article, learn more about Livestock Risk Protection (LRP) and Livestock Gross Margin (LGM) insurance this evening during the OSU Extension Beef Team’s Ohio Cattle Feeding School webinar beginning at 6 p.m. It’s offered free, but registration is required. Find more information linked here, or just click here to register.〉

The changes to the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) Livestock Risk Protection (LRP) insurance plan took effect on January 20, 2021, for the crop year 2021 and succeeding crop years. These changes included: (a) increasing livestock head limits for feeder and fed cattle to 6,000 head per endorsement/12,000 head annually and swine to 40,000 head per endorsement/150,000 head annually; (b) modifying the requirement to own insured livestock until the last 60 days of the endorsement; (c) increasing the endorsement lengths for swine up to 52 weeks; and, (d) creating new feeder cattle and swine types to allow for unborn livestock to be insured. These changes, in addition to the dramatic changes in subsidy levels and allowing premiums to be paid at the end of the coverage endorsement period, should significantly improve the use of LRP. How much so likely depends on several factors including Continue reading

Will higher corn prices temper the expectation for higher feeder cattle prices?

– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee

Will higher corn prices or the expectation of higher corn prices temper the expectation for higher feeder cattle prices this year?

The simple answer is yes. If input costs increase then that means there is less money available for the feedlot to pay for feeder cattle. However, live cattle futures have been gaining strength which provides support for feeder cattle prices. Thus, corn and other feedstuff prices are increasing which is putting pressure on feeder cattle prices while the expectation for finished cattle prices is supportive of higher prices. This means that the two most important aspects of the feeder cattle market are pulling market prices in opposite directions. It is not known at this time which one will exert more force and win the tug of war, but what is known is that they will temper each other.

What is known at this time is that the futures market and livestock risk protection insurance are providing an opportunity to hedge summer and fall cattle sales at profitable prices. It may be worth considering.

Resource Kit Available for Those Exploring a Meat Processing Business

This “Tool Kit” is designed to be intuitive as entrepreneurs move through the business planning process.

A team of Ohio State business and meat science specialists have compiled a Meat Processing Business Tool Kit for people who are exploring the meat processing business. Designed as a decision making aid for people exploring investing in or expanding a meat processing facility, this online tool kit can help entrepreneurs evaluate the business and navigate business planning. The Meat Processing Business Tool Kit may be found linked here on the OSU South Centers webpage.

Winter Storms and Cold Cattle in the Southeast

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

If you are reading this, there is a good chance you have been dealing with impacts from the significant winter storm wreaking havoc on a large portion of the U.S. – even in the deep south. Power outages, school or business closures, and cold cattle are all occurring. This storm is rare due to not only the cold temperatures and ice/snow, but also the duration of the event.

Cattle sales volumes will be low this week in most places as some auctions close along with a reduction in the supply of cattle that would show up for auction even if they are open. The impact on winter pasture will be seen in the coming weeks as there will likely be at least some cattle that go to market sooner than intended due to reduced pasture conditions.

While there are certainly market impacts that will play out over the next few weeks, the production challenges faced by cattle producers are the most severe during an extreme winter weather event such as this one. For operations who have started calving, harsh temperatures and precipitation create significant stress for newborn calves (and cattle producers). Calving is not yet in full swing for most producers but there will be Continue reading

Weekly Livestock Comments for February 12, 2021

– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee

FED CATTLE: Fed cattle traded steady to $1 higher compared to last week on a live basis. Prices on a live basis were primarily $113 to $114 while dressed prices were mainly $180.

The 5-area weighted average prices thru Thursday were $113.78 live, up $0.50 compared to last week and $180.07 dressed, up $0.75 from a week ago. A year ago, prices were $118.88 live and $190.26 dressed.

It would appear the cash price is attempting to catch live cattle futures, but that process is tougher than herding cats. The cash price remains $2 lower than the February live cattle contract, and there are two weeks left to close the gap. The more optimistic part of the market is April live cattle trading near $125. The ability to reach or surpass this price level is dependent on beef demand. Beef supply may play a role as well if the extremely cold temperatures persist and result in reduced cattle performance in the feedlot. It is always difficult to predict markets and weather. In this particular case, the Continue reading

What Does the Increased Grain Prices Mean for Backgrounders?

– Jeff Lehmkuhler, PhD, PAS, Associate Extension Professor, University of Kentucky

This time of year, we receive several questions regarding supplementing cows and calves. Often, I must ask what feeds are available and prices as this is rarely included in the original request. I see a wide range in feed prices when this information comes back. However, one thing is certain, feed prices are higher in 2021. What impact will this have on the backgrounding segment?

The backgrounding and stocker enterprises are tight margin industries. By margin, we are referring to the difference in the value of a feeder calf at marketing and the price paid at purchase. If an 800-pound feeder is expected to bring $1,050 and was purchased for $750, the margin would be $300 to cover all costs and hopefully leave a bit of profit. If feed costs increase and all other factors remain the same, then the margin is decreased. To compensate, buyers will have to pay less for feeders if the projected sell price does not march up with the feed costs. Let’s compare two scenarios where feed cost is $180/ton versus $280/ton. I’ll use a model that includes typical enterprise budget information. I am leaving labor out, though one should value their time. Many enterprise budget tools are available, and you should find one that you like and enter your own values.

Additional inputs are necessary and include days owned or fed. Purchase date and expected marketing date to look at the feeder cattle contract closest to your marketing day along with the basis. The diet or ration to be fed and cost is a critical part of Continue reading

2020 Cow Slaughter and 2021 Inventory Expectations

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

Cattle slaughter got a lot of attention in 2020 as the sector raced to deal with labor challenges in the spring that greatly impacted processing volumes. At its lowest point, federally inspected cattle slaughter was down by more than one-third from 2019. But the processing industry showed a lot of resiliency through summer as slaughter levels picked back up, despite the challenges the pandemic created.

While cattle slaughter is often considered as a whole, I want to focus this discussion on cow slaughter for three reasons. First, cow slaughter was not impacted the same as steer and heifer slaughter during the pandemic. Secondly, cull cow prices were relatively strong last year, which created additional incentive for culling. And third, 2020 cow slaughter volumes impact beef cow numbers in 2021. This final point should be reflected in USDA’s cattle inventory estimates that will be released on January 29th.

The beef cow slaughter chart that I am sharing this month compares beef cow slaughter in 2019 and 2020. The sharp drop in slaughter levels from March to April is clear in the chart. However, cow slaughter was not Continue reading

Fed Cattle and Feeder Cattle Divergence

– Stephen R. Koontz, Department of Agricultural and Resource Economics, Colorado State University

The current outlook communications for the cattle and beef markets in 2021 are commonly optimistic –bullish. The underlying market fundamentals support this position. On feed number are currently high and will moderate through the remainder of the year with smaller placements and smaller calf numbers. Further, the currently very large carcass weights will shrink into the spring as winter weather has its impact. Similar optimistism is often offered for feeder cattle and calves but I believe this is a tenuous perspective. Rather, I believe cow-calf producers should look hard at Livestock Revenue Protection (LRP) insurance. My outlook communications discussed to potential for returning to normal seasonal patterns and opportunities this year. For cow-calf producers that involves diversifying and making some sales in the spring and early summer with fed cattle and beef price rallies. I am concerned that this year may playout more like last year. In 2020, selling opportunities evaporated through March. If the current changes to feed costs persists then we may be in for a repeat.

The February WASDE report will be released this week and the first look at USDA grain acreage forecasts will be offered at the Agricultural Outlook Forum at the end of next week. This information will update us on the tightness of corn and soybean stocks and possible acreage relief with this crop year. Regardless, stocks are considerably Continue reading

Matching the Cow’s Milk Production to Your Forage Resources

Steve Boyles, OSU Extension Beef Specialist (this originally appeared in the Ohio Farmer on-line)

Genetics and cow type must match the available feed resources and herd management style

Type differences exist due to size, milk production, suitability to the environment and desirability of different types for profit. All these factors affect the amount of nutrients required by the individual. The nutrient requirements of the various types can determine different management schemes.

There are several segments of the industry that influence size of beef cattle. The packer-grocery store segment has preferred USDA Choice carcasses in the 700 to 900 lb range.  The feedlot operator is looking for calves that have an acceptable dressing percent and attain USDA Choice grade at 1100 to 1400 lbs (weights have been somewhat heavier in 2020).  Various combinations of different bulls and cows can accomplish this goal.

Size and Nutrition:  Considerable changes in outputs and requirements per animal may be induced by changes in cow size.  Table 1 illustrates the Continue reading

Beef Cattle Market Outlook for 2021 with Dr. Kenny Burdine

As part of our 2021 ‘virtual’ winter programming, the Ohio State University Extension Beef Team was privileged to host University of Kentucky Livestock Marketing Specialist Kenny Burdine via ZOOM on January 26th. During his presentation, after reviewing the impacts of COVID-19 on the 2020 beef cattle market and laying the foundation for what may be on the horizon, Burdine offered his insight into what we might expect the markets to look like as we progress through 2021. Excerpted here in about 9 minutes from that presentation are Dr. Burdine’s projections for what he expects from the beef cattle markets throughout the coming year.

Throoughout his presentation Burdine detailed the impact of the COVID-19 pandemic on the 2020 livestock markets, and offered insight into the Continue reading