Kentucky Beef Cattle Market Update for September 1

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

As I write this at the end of August, the general tone of the cattle market remains relatively upbeat. It looks like the 5 area weekly fed cattle price will be north of $105 per cwt this week and has continued to steadily rise since July. Last Friday’s cattle-on-feed report did show an increase in placements and a decrease in the number of cattle that had been on feed over 90 and 120 days, both of which point to feedlot inventories getting more current. While slaughter weights continue to rise, they are moving closer to where they were last year. And, it’s important to remember that feed prices also impact weights and are likely at play this year as well.

Spring CME© Live Cattle futures have pulled back a little bit since mid-August, but remain in the mid-$110’s as I write this. We have seen similar downward movements in CME© Feeder Cattle futures, but these movements have actually been larger in magnitude. Still, cattle prices across the Commonwealth have steadily improved, with some expected variation from week-to-week. Figure 1 below shows a drop in the price of 850 lb M/L #1-2 steers for the current week, that is consistent with the decreases in futures prices. But last week’s prices were Continue reading

Transportation Shrink in Beef Cattle

Steve Boyles, OSU Beef Extension Specialist

A better understanding of factors affecting shrink should help buyers and sellers of cattle to arrive at a fair pencil shrink under specific marketing conditions.

Types of Shrink. There are two types of shrink.  One is excretory which is the loss of urine and feces.  When ambient temperatures are low (below freezing, urine and fecal output can comprise 30-35% of shrink.  When temperatures are hot, urine and fecal losses account for about 15-20% of shrink.  Much of this loss is replaced when cattle are again allowed to eat and drink.

The second type is loss is tissue loss.  It is the loss of fluid from the cells.  Tissue shrinkage occurs after holding cattle off feed and water. It also occurs when cattle are subjected to stresses such as hauling. It becomes more important than excretory shrink the longer the shipping time. Since it is actual loss of tissue weight, it is harder to Continue reading

Weekly Livestock Comments for September 4, 2020

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

FED CATTLE: Fed cattle traded $2 lower compared to last week on a live basis. Prices on a live basis were primarily $101 to $105 while dressed prices were mainly $162 to $164.

The 5-area weighted average prices thru Thursday were $103.18 live, down $1.94 compared to last week and $163.11 dressed, down $3.41 from a week ago. A year ago, prices were $102.31 live and $166.19 dressed.

Finished cattle prices once again declined compared to the previous week. Late summer and early fall are consistently a tough time period for cattle exiting the feedlot as beef demand softens and so does demand for finished cattle. This soft demand will persist for several weeks, but it is hard to imagine cattle prices retesting the lows they have already experienced earlier in the summer. The one thing that should support finished cattle prices is the hole that was created by reduced placements into feedlots during March and April. Many of the animals that would have been placed in March and April would be coming off feed now, but the Continue reading

What are Total Export Commitments Telling Us about Beef’s Potential in 2020: Positive Signs?

Overarching Market Conditions

The recent cattle on feed report suggests that cattle feedlots are coming closer to sorting through much of the backlog associated with plant closures and shutdowns as a result of plant workers testing positive and plants implementing CDC and OSHA worker health recommendations. For example, the number of cattle on feed over 90 days has dipped below 2019 levels for the first time since April. However, cattle on feed over 120 days is still about 10% higher than 2019. The result of cattle being on feed longer is sustained record level dressed weights for both steers and heifers. Heavier carcasses has led to higher beef production in recent months relative to 2019 putting downward pressure on cattle prices. With net feedlot placements (i.e. higher than 2019 and the five year average, cattle feedlots look like they are once again reloading with cattle less than 700 lbs. potentially sustaining record beef production in the long term that will need to be consumed. With lower, but growing, domestic demand and concerns about what a second government shutdown might due to domestic demand, beef export demand is likely to play a larger and more prominent role in sustaining domestic cattle prices.

Total Beef Export Commitments

One way to monitor beef exports is through USDA-FAS weekly export sales report. This report shows the Continue reading

Weekly Livestock Comments for August 21, 2020

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

FED CATTLE: Fed cattle traded $2 higher compared to last week on a live basis. Pric-es on a live basis were primarily $106 to $108 while dressed prices were mainly $168 to $170.

The 5-area weighted average prices thru Thursday were $106.62 live, up $2.13 com-pared to last week and $169.11 dressed, up $1.05 from a week ago. A year ago, prices were $108.81 live and $175.02 dressed.

Fed cattle prices garnered a couple more dollars this week which should put some cattle feeders back into black ink. Positive returns are welcome, but suffering through the long period of depressed prices with a lot of red ink to show for it means cattle feeders have a hole to fill in over the next several months. They should be able to recoup some of those losses now that fin-ished cattle prices have rebounded a little and many of the cattle coming off feed the next couple of months will have been purchased at much lower prices. A $20 to $30 per head profit will not do much to Continue reading

Ownership and Marketing Agreements for Custom Fed Cattle

Steve Boyles, OSU Extension Beef Specialist

Last week in the OSU Beef Team Newsletter we had an article on Custom Cattle Feeding; a Retained Ownership Option.  A cattle feeder and reader of the article shared this valuable, additional information on ownership and marketing topics.

Having fed in several custom lots, I would not deliver cattle without having a Bailor/Bailee Agreement in place. This is different than a lien. The banks put liens on you, the cattle are collateral. They don’t care if they get paid from the sale of cattle or a load of turnips.

The Bailor/Bailee Agreement shows all parties involved (cattle owner, feedlot and should it get to this, banks, stockyards, packers, sheriff, courts) who is/are the owner(s) of the cattle. Without this it’s one person’s word against another’s regarding who’s cattle they are. I could tell you some real horror stories and unfortunately, possession Continue reading

Valuing Bred Beef Heifers

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

Several weeks ago, there was a discussion on rules of thumb for valuing bred beef heifers. This led to a question this week about rules of thumb related to valuing bred cows and their appreciation and depreciation.

There are no rules of thumb, but there was some research performed at Oklahoma State University that can be helpful in determining bred cow value. The study found several factors including animal age, weight, overall quality, stage of gestation, hide color, and time of year influence price. Based on the study findings, bred heifers and three year old animals have the highest value, but bred cows hold their value fairly well until age six. Bred cow values increases the longer bred an animal is and the heavier she is.

There are some rather useful details in the study that can be used to Continue reading

Livestock Gross Margin Revisited

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

Recently the Risk Management Agency (RMA) announced changes to Livestock Gross Margin (LGM) insurance. The premium subsidy now ranges from 18 percent to 50 percent depending on the deductible level. In addition, the premium payment date was moved from the time of purchase until the end of the coverage period. LGM covers the finishing margin for cattle. The margin mirrors a “cattle crush”, where one sells live cattle and buys corn and feeder cattle. As a product, LGM-Cattle is available in states throughout the central U.S., but it has not been widely used. After some initial interest in 2006, the only year with noticeable volume was 2017, with 13,012 head insured across 19 policies with premiums paid. In 2020 (the fiscal year that just ended on June 30) there were only 633 head covered in the U.S. by producers in Iowa, Nebraska and Wisconsin. The premium changes may make the product more attractive.

The expected and actual margins are reasonable indicators of what happens to feeding margins through time for unhedged or cash-only feedlots. The LGM margin is a little unrealistic, as it assumes a 750-pound yearling is fed 50 bushels of corn (as part of a ration) to an out-weight of 1250 pounds. Consider the LGM margin for yearlings that are six months from marketing as fed cattle. There is a formula that takes Continue reading

Kentucky Beef Cattle Market Update

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

As I summarize the cattle markets in mid-August, I am struck by how much better things look than they did in the spring. It looks like fed cattle are going to trade north of $104 per cwt this week, which is an increase of almost $10 per cwt from the first week of July. As I write this on the afternoon of Friday August 14th, August CME© Live Cattle Futures are trading around $107-$108 per cwt, which suggests a relatively normal cash-to-futures relationship. And, April fats are above $117, which bodes very well for feeders this fall.

For the last 6 weeks, federally inspected slaughter has been running from right at 2019 levels to about 2% below. Slaughter weights aren’t coming down, but seasonally they tend to increase until late fall / early winter anyway. The rate of increase above year-ago is slowly decreasing and I have to think that will continue for a couple more months. This is a sign that we are working through the backlog of cattle in the system, which has been a topic of much discussion since spring and one that I will revisit at the end of this update.

CME© feeder cattle futures have continued to increase and are now in the mid-upper $140’s for fall. Spring contracts are at a slight Continue reading

Custom Cattle Feeding; a Retained Ownership Option

Stephen Boyles, Ohio State University Extension Beef Specialist

Custom feeding is paying someone else to feed your calves because you, the cattle owner, do not have the facilities, time, or expertise to feed cattle. Custom feeding allows the feedlot operator to use feed, facilities, and labor without large investments in cattle. Cattle owners can take advantage of favorable market situations or improved genetics they have developed in their cow-calf operation.

Custom feeding is not currently practiced in Ohio to the degree it is practiced in the high plains. Much of today’s cattle feeding is located on the high plains.  Custom feeding may allow existing feeders to expand without encountering as much financial risk. Financial institutions, livestock marketing associations, packing plants and feed companies may need to offer shared financial opportunities to increase the profits of their cow-calf operators and cattle feeders.

Increased opportunities for marketing or at least processing/fabrication of finished cattle are needed. However, we also need to provide the business atmosphere to supply any increased demand for finished cattle. Custom feeding may allow spreading the Continue reading