Economics

Maximizing Feeder Calf Value

The sixth and final session of the 2021 Ohio Beef Cattle Management School was hosted via ZOOM by the Ohio State University Extension Beef Team on February 22nd. During the concluding session, OSU Extension Beef Field Specialist Garth Ruff discussed a variety of ways cattlemen might improve profitability in a cow/calf enterprise including utilization of superior genetics, capitalizing on seasonal marketing trends, and calf management strategies that add value to individual, and groups of calves. Listen in below as Garth shares insight into maximizing feeder calf values.

Find recordings from all the 2021 Ohio Beef School sessions linked here.

The cost of negotiated trade and true price discovery

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

There was a question last week about all the different methods that have been proposed to achieve adequate negotiated trade and true price discovery in the finished cattle market. There has been proposed legislation as well as efforts by NCBA that is a voluntary framework, but NCBA’s voluntary framework could lead to them pushing for a policy framework if packers and cattle feeders do not meet minimum thresholds.

For those interested in the specifics, this information can be found from several sources online. However, it is important for interested parties to understand that any type of mandate or policy will increase costs to the industry directly in two ways.

The first way is that it will increase transaction costs between packers and feedlots as they will Continue reading →

Rising Feed Prices Create Divergence Between Fed and Feeder Cattle Values

– Kenny Burdine, Livestock Marketing Specialist, University of Kentucky

As I write this on the first Monday of May, it’s hard not to think about all the changes we have seen over the last year. A quick look at the year-ago column of the price table below reveals how much better things are in most markets than they were this time last year as we were dealing with increasing challenges from the COVID-19 pandemic. Early May was about the low point for cattle harvest in 2020 and can be easily picked out by the bottom made this time last year in the slaughter steer price chart above (see the dotted 2020 line). Historically, May is a good month for fed cattle and beef prices as weather is warming up and we are moving into the spring grilling season. This can be seen in both the Continue reading →

Matching Nutrient Intake to the Production Cycle of Beef Cows

– Allen Gahler, Extension Educator for Agriculture and Natural Resources, OSU Extension-Sandusky County (originally published in The Ohio Cattleman)

Could we reduce our total feed needs by more correctly matching the breeding season to our feed resources?

Whether you are jumping into or preparing for breeding season, or you calve in the fall and have recently turned out mid gestation cows, you certainly have had a lower feed bill on your mind as the winter feeding period comes to an end. That lower feed bill is usually a welcome beginning to a new growing season, and the worry of making it through another winter is replaced by the worry of making the right breeding decisions and weaning off a profitable calf crop.  But perhaps we could alleviate some of those other worries by focusing more on the timing of the breeding season as it relates to what we are feeding them, rather than which bull matches better with each group of cows and which bull is truly heifer safe.

What I am talking about is stepping back and taking a good hard look at when we calve and comparing it to the quality of our available feed at Continue reading →

Weekly Livestock Comments for April 23, 2021

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

FED CATTLE: Fed cattle traded steady to $1 lower compared to last week on a live basis. Prices on a live basis were primarily $120 to $122 while dressed prices were mostly $191 to $193.

The 5-area weighted average prices thru Thursday were $121.36 live, down $0.57 compared to last week and $192.11 dressed, down $3.52 from a week ago. A year ago, prices were $96.95 live and $154.27 dressed.

Precipitous is the word that comes to mind as it relates to finished cattle markets and live cattle futures contracts, because that is the type of price decline that has taken place this week. Seasonal beef demand is strengthening, which is sending beef prices higher, but cattle feeders are watching fed cattle prices decline as packers have an ample supply of cattle to hang on the rail. This is one challenge that must be navigated with a non-storable product such as cattle. The primary method the beef industry navigates this situation is by keeping cattle on grass longer. However, cattle cannot be kept indefinitely. The supply of market ready cattle will likely Continue reading →

April Cattle on Feed and 2020 Comparisons

– James Mitchell, Livestock Marketing Specialist, University of Arkansas

Last month Kenny, Josh, and I wrote about the challenges with making year-over-year comparisons to 2020. Comparisons will be based on periods in 2020 when COVID was having major impacts on the beef sector. Last week’s highly anticipated Cattle on Feed report was the example we had in mind when we wrote that article. The Cattle on Feed (COF) report includes estimates for feedlot placements, inventory, and marketings, and each was hard to predict.

The graph above shows feedlot placements for 2021 (blue line), 2020 (dotted blue line), and the 2015-2019 average (red line). March feedlot placements totaled 1.997 million head, a 28.3 percent increase over March 2020. The cattle placement estimate is a product of two events. First, recall this time last year was when the Continue reading →

Considerations When Making Beef Cow Culling Decisions

The sixth and final session of the 2021 Ohio Beef Cattle Management School was hosted via ZOOM by the Ohio State University Extension Beef Team on February 22nd. During that session the attention turned to cow longevity, and factors involved in making culling decisions. In the presentation embedded below we join OSU Extension Educator Dean Kreager as he explores the range of considerations involved including pregnancy status, body condition, soundness, feed resources and the seasonal market environment for culls.

Find recordings from all the 2021 Ohio Beef School sessions linked here.

Summer and Fall Cattle Markets

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

Weekly live cattle cash prices have remained relatively strong amid the market setting discussed in this newsletter last week. The continued rally in the cutout suggests strong beef demand in the near-term. Similarly, feeder cattle prices have been stronger in many regions over the past few weeks. However, there is more uncertainty in the summer and fall months for both live and feeder cattle prices.

Cattle futures prices declined over the past week and a half after rallying at the end of March and into early April. The June live cattle contract closed above $125 on April 7th but has since posted eight consecutive days of declines and closed below $119 in trading today.  The summer and fall month contracts experienced larger declines than the winter and spring 2022 contracts. Feeder cattle futures have also been on a decline over the past few weeks. The May contract closed today about $10 lower than on April 7th. Similarly, the fall contracts are back into the low to mid $150s after spending a few days above $160.

The next cattle on feed report is set for release this Friday and is likely to contain some eye-popping year-over-year comparisons as the March 2021 data will be positioned against March 2020 data when covid disruptions were in full effect and placements were very low. While placements are nearly Continue reading →

Pregnancy Checking; the Economics and Alternative Methods for Beef Cows

If you’re breeding for January calves, the time when you might begin to confirm pregnancy in those cows is approaching. During the fifth session of the 2021 Ohio Beef Cattle Management School that was hosted via ZOOM by the Ohio State University Extension Beef Team this past winter, a portion of the program was focused on managing reproductive efficiencies in the beef herd and included discussion on the economic significance of confirming pregnancy in beef cows and the various diagnostic methods that are available. Listen in below as OSU Extension Educator Al Gahler discusses the economic returns to the operation realized through pregnancy checking cows in a timely fashion, and the various methods it can be accomplished.

Opportunities to Manage Price Risk in 2021

– Kenny Burdine, Livestock Marketing Specialist, University of Kentucky

When Josh, James, and I put together our spring market outlook article and video in early March, we shared an expectation of improving feeder cattle prices throughout 2021. Similar forecasts have been made by many analysts given an expectation of improving domestic demand and some encouraging export levels to start the year. This same general optimism can be seen in CME© feeder cattle futures prices as deferred months are trading at significant premiums to nearer months. This is not uncommon in the spring of the year, but the magnitude of this carry in 2021 is much larger than usual. James referenced the wide April to September spread in his article last week. As I write this on April 12, 2021, the August through November feeder cattle futures contracts were trading at a $14-$18 premium over the April contract. The settle prices from Friday April 9th are shown in the table below.

The simple way to think about this is that the futures market is expecting heavy feeder cattle prices to increase by $14-$18 per cwt between now and the August to November time period. While there is value in that implied forecast, it also speaks of Continue reading →