Economics

Weekly Livestock Comments for October 12, 2018

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

FED CATTLE: Fed cattle traded steady com-pared to last week on a live basis. Prices on a live basis were mainly $110 to $111 while prices on a dressed basis were mainly $173 to $174.

The 5-area weighted average prices thru Thursday were $110.63 live, up $0.07 from last week and $173.76 dressed, down $1.06 from a week ago. A year ago prices were $111.05 live and $174.96 dressed.

Finished cattle continued trading steady for the fifth consecutive week. Early in this trend, one might say this was beneficial for cattle feeders as they were able to hold packers at bay and keep prices from falling. However, some concern may be creeping in from the Continue reading →

Spot, Futures and Forward Markets

– Matthew A. Diersen, Professor and Extension Specialist, Department of Economics, South Dakota State University

Seasonality is often discussed in terms of a consistent pattern in cash prices. In the northern plains the cash or spot price for fed cattle has an April or May peak with a September or October low. Such patterns are also consistently observed in forecasts and futures prices. In addition, the forward contract market may provide some insights into intervening months. Can such patterns be used when making marketing or risk management decisions? The answer depends on how much stock one puts into the different prices and what patterns are expected to hold going forward.

Consider the seasonal pattern implied by recent live cattle futures prices. The nearby October 2018 contract is Continue reading →

Choice Beef Production a Little Tighter Than A Year Ago

– David P. Anderson, Professor and Extension Economist, Texas A&M AgriLife Extension Service

Beef production has continued to run above a year ago throughout 2018. As usual, digging a little deeper in the numbers reveals some interesting details on type and quality of beef being produced in recent weeks and some implications for prices.

Slaughter and Production Up

Federally inspected beef production over the last month is up 1.1 percent over the same period last year. During the same period fed steer slaughter is down almost 2 percent while heifer and cow slaughter are 4.4 and 7 percent higher than a year ago, respectively. So, all the increase in beef production in recent weeks is coming from heifers and cull cows. It’s worth a reminder that Continue reading →

What Path Will You Choose?

– John F. Grimes, OSU Extension Beef Coordinator

Based on reports from USDA and industry analysts such as Cattle Fax, it appears that the aggressive expansion of the U.S. beef cowherd will peak in 2019 and level off in the early part of the next decade. From the time the most recent herd expansion began in 2014, producers will have added over 3 million beef cows to the nation’s herd. Our primary protein competitors, pork and poultry, have also been in expansion mode recently which adds more competition for the consumer’s food dollars.

For all of my adult life, I have heard agricultural economists talk about the “cattle cycle”. The cycle is often reported in approximately 10-year increments and a wide variety of economic, environmental, and political effects can greatly influence each cycle. Current and future cattle cycles will face increasingly varied and complex factors that affect the economic health of the beef industry. The next cattle cycle will be impacted by factors such as drought, trade policies, domestic and foreign economies, competition from pork and poultry, sustainability concerns, and the development of meat substitutes.

What does all of this mean for you as a cattleman? I believe there is no time like the present to Continue reading →

Choice Beef Production a Little Tighter Than A Year Ago

– David P. Anderson, Professor and Extension Economist, Texas A&M AgriLife Extension Service

Beef production has continued to run above a year ago throughout 2018. As usual, digging a little deeper in the numbers reveals some interesting details on type and quality of beef being produced in recent weeks and some implications for prices.

Slaughter and Production Up

Federally inspected beef production over the last month is up 1.1 percent over the same period last year. During the same period fed steer slaughter is down almost 2 percent while heifer and cow slaughter are 4.4 and 7 percent higher than a year ago, respectively. So, all the increase in beef production in recent weeks is coming from heifers and cull cows. It’s worth a reminder that Continue reading →

Weekly Livestock Comments for September 28, 2018

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

FED CATTLE: Fed cattle traded steady com-pared to last week. Prices on a live basis were mainly $110 to $111 while prices on a dressed basis were mainly $174 to $175.

The 5-area weighted average prices thru Thursday were $110.37 live, down $0.28 from last week and $174.02 dressed, down $0.79 from a week ago. A year ago prices were $107.88 live and $171.13 dressed.

It is difficult to tell who is winning the fed cattle trade war as prices have been fairly steady for three consecutive weeks. If one were to guess, packers and feedlot managers could either be satisfied or disgruntled at not gaining any ground the past few weeks. It is difficult to imagine live cattle prices moving lower in the fourth quarter with a target as high as Continue reading →

Weekly Livestock Comments for September 21, 2018

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

FED CATTLE: Fed cattle traded steady com-pared to last week. Prices on a live basis were mainly $110 to $111 while prices on a dressed basis were mainly $174 to $175.

The 5-area weighted average prices thru Thursday were $110.65 live, up $2.86 from last week and $174.81 dressed, up $3.29 from a week ago. A year ago prices were $106.75 live and $166.00 dressed.

Despite more cattle on feed, the market price of finished cattle remains strong and continues to outperform year ago prices. Cattle feeders continue to fill pens and the strong feeder cattle prices demonstrates how much cattle feeders want to purchase cattle. It would appear cattle feeders are expecting finished cattle prices to remain strong in the near term and escalate moving into 2019. This thought process may not be as wild as many think it is as beef demand remains strong which supports prices. Does this mean finished cattle prices will only escalate through the end of the year? One should probably not be so Continue reading →

Kentucky Beef Cattle Market Update

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

Feeder cattle markets really gained some momentum during the first half of September. As I write this on September 15th, fall CME© Feeder Cattle futures had pushed up into the upper $150’s. Spring 2019 futures, which will drive our fall calf market, were trading in the low-mid $150’s. 550# steer calf prices in KY have shown very little seasonal drop from summer, still moving in the $152-$155 per cwt range on a state average basis. 850# steers were selling for $138 on a state average basis, but up into the $140’s in larger groups.

While I am certain there are many that are not happy with the current cattle market, I truly feel like the market has been incredibly resilient. Production of all three major meats are significantly higher in 2018 and I was very concerned all year how the increased per capita availability would impact prices. Put simply, the cattle market has held better than I thought it would. And, despite a lot of uncertainty surrounding trade, beef exports have Continue reading →

Seasonality of Feeder Futures

– Matthew A. Diersen, Professor and Extension Specialist, Department of Economics, South Dakota State University

Last spring I had the privilege to teach an SDSU course titled “Trading in Agricultural Futures and Options”. An assigned exercise was to propose and evaluate a strategy that could be routinely implemented. Seasonality was a common theme, asking things like “When do new-crop soybean futures peak in price?” After hearing some of the pitches by students, I wrote a note to myself to evaluate seasonality of feeder cattle futures prices.

Conventional wisdom says that markets are efficient and that any pattern that could be exploited should be arbitraged or bid away by speculators. At the same time, this is the feeder cattle market, which is a little thinner and more difficult to trade than many markets. As it is approaching the time of year for potentially backgrounding calves in the northern plains, the focus will be on the March feeder cattle futures. Thus, someone with calves may be following the Continue reading →

Preconditioning Calves; Is it in the Cards?

– Adam Hady, UW Extension Agriculture Agent, Richland County (article recently appeared in the Wisconsin Agriculturist Magazine)

As the summer grazing season winds down and the time is getting near for cow calf producers to wean calves, they might be asking themselves, with the prices of many agricultural commodities, can I add some value to my calves by preconditioning my calves or just sell them right off the cow? For starters, what is preconditioning, and why would we do it? Preconditioning is a practice that gets calves ready for the next phase of production and done with proper management can add a few dollars into the cow/calf producer’s pocket. In general, these are programs that are done for 30-60 days with 45 being the most common. During this time, calves are weaned, vaccinated, bunk broke, and water tank broke.

So, how does holding these calves for 45 days actually make the cow/calf operator any money? They have the cost of feeding the calves, vaccinating, yardage, and death loss. Knowing feed cost and price slides are the key factors adding extra dollars through preconditioning. Understanding these factors can also help you make the decision on the possibility of backgrounding longer into the winter or sell the calves outright versus preconditioning. Overall, the goal to preconditioning is to sell a few more pounds of calf by being able to put on some cheap pounds of gain and add some value to the calf by having an Continue reading →