December Cattle on Feed

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

The latest Cattle on Feed report was released last Friday and included larger than expected placements of cattle on feed during December 2021. This contributed to total cattle on feed number of just over 12 million head on January 1, 2022 which is up 0.6 percent over January 1, 2021. This total marked the sixth highest cattle on feed inventory on record.

Placements during December 2021 totaled 1.96 million head which is about 6.5 percent above placements during December 2020. The biggest increase in placements was seen in cattle weighing less than 700 pounds. Placements of this category were up 9.5 percent compared to a year ago. Heavier placements (over 800 pounds) were only Continue reading

Hay Production and Prices

– 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

The Top Ten New Years’ Resolutions for Cow/Calf Producers

Dr. Michelle Arnold, UK Veterinary Diagnostic Laboratory

Insanity is doing the same thing over and over and expecting different results.”

We have all heard this phrase, often attributed to Albert Einstein, and it certainly applies when it comes to the health and care of cattle. If you want to improve health and prevent as many problems as possible, think of adopting one or more of the following resolutions.

In 2022, I resolve to . . Continue reading

Three Questions for the 2022 Cattle Market

– 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 10th, April CME© Live Cattle futures are on the board above $140 and the break to Continue reading

Questions a Plenty Going Forward

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

Cattle Markets in 2022

– 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

Pricing Calves

– 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

Evaluate, Adapt, Improve, Repeat

Garth Ruff, Beef Cattle Field Specialist, OSU Extension

As I reflect over what we have worked through in the beef industry over the last 15 months, some of which being unprecedented times, I am fairly optimistic heading into the New Year. As we move into 2022 and hopefully past the worst of the COVID pandemic, there are opportunities to refine management practices that can have an impact on the bottom line going forward.

Those is no doubt that the pandemic, supply chain issues, and workforce shortages had major impacts on cattle prices the first half of 2021. However, what we have seen since late June is that fed cattle prices have been at or higher than the five-year average. A week or so ago, Dr. Kenny Burdine of the University of Kentucky, highlighted the following in his weekly cattle market notes, “Yet in 2021, fed cattle prices have trended upward since spring and did not put in a fall bottom at all. The last few weeks have been especially encouraging as prices have risen by more than $6 per cwt since the first week of October.”

Having wrapped up the OCA Replacement Female Sale, demand for replacement females remains strong, partly influenced by sustained strong cull cow prices and optimism in feeder calf prices looking ahead to the next marketing year.

If demand for beef and feeder cattle remain strong into the coming year, there is Continue reading

Weekly Livestock Comments for December 23, 2021

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

FED CATTLE: Fed cattle traded $1 to $2 lower compared to last week on a live basis. Prices on a live basis primarily ranged from $135 to $137 while dressed prices were mainly $217 to $219.

The 5-area weighted average prices thru Wednesday were $135.55 live, down $1.62 compared to last week and $217.30 dressed, down $1.06 from a week ago. A year ago, prices were $109.03 live and $171.67 dressed.

Fed cattle prices made a good run to finish the fall months, but they have softened as the market has reached the end of the year. This is not unexpected as most packers will reduce slaughter days by 1 to 1.5 days each of the next two weeks. Simply stated, this meant there were plenty of slaughter ready cattle to meet the needs of reduced slaughter weeks. As slaughter levels ramp back to typical levels in January, finished cattle prices will be supported moving into March and April. The January and February market may continue to be sluggish relative to the late fall heroics, but prices should stay above $130 and push back to the Continue reading

Tips for Weathering High Fertilizer Prices

– Chris Teutsch and John Grove, UK Research and Education Center at Princeton

Figure 1. Fertilizer price trends for nitrogen (urea), phosphorus (DAP) and potassium (muriate of potash). In the last 12 months fertilizer prices have increased more than 50% (Data from Russ Quinn at DTN).

In the last year, the cost of fertilizer had increased more than 125%, 85%, and 115%, for urea (nitrogen), diammonium phosphate (phosphorus), and muriate of potash (potassium), respectively (Figure 1). The price of nitrogen could continue to increase due to the idling of N manufacturing capacity caused by weather issues and increased natural gas and shipping costs. Nitrogen prices could conceivably reach $1.00/lb N early next year. So, the question becomes what management strategies ruminant livestock producers could use to manage soil fertility as fertilizer markets continue to experience volatility.

Management Strategies: No “Silver Bullets”

Figure 2. Few nutrients are removed from grazing systems. Nutrients enter grazing systems via feed, fertilizer, and nitrogen fixation in legumes and are recycled by grazing and deposition of dung and urine and decomposition of plant residue and senesced roots (Illustration by Chris Teutsch, UKY).

We wish we had a miracle cure for high fertilizer prices, but we don’t. And we would caution you to closely scrutinize claims from retailers of products that are offering you something that sounds too good to be true. One competitive advantage that well managed grazing systems have is that nutrient removal is very low and with good grazing management strong nutrient cycles can be developed (Figure 2). Below you will find some strategies that can be implemented to help you get through the current period of high fertilizer prices.

Soil test pastures and hay fields. You are probably saying to yourself why in the world would I even bother soil testing when fertilizer prices are so high. It is impossible to Continue reading