Managing Risk in a Risky Business

Garth Ruff, Field Specialist Beef Cattle and Livestock Marketing, OSU Extension

Manage the risk of grazing stockers!

The grass is getting greener by the day and livestock are being turned out to pasture as we speak. For many years cattle producers have purchased and turned out stocker cattle on grass this time of year. The goal: put on cheap gain, utilizing grazed forages. While the pounds added to cattle in a stocker operation might be cheap, one thing is for certain that in 2024 calves being purchased to be stockers on grass are anything but.

Looking at livestock auction reports in eastern Ohio 300-500 pound steers last week cost anywhere from $3.00-$3.52 per pound for quality steer calves. Heifer calves cost $2.50 – $3.00 per pound. That is a range in cost from $750 to north of $1,700 per head invested in a calf that will be grazing through the summer. With that kind of up-front costs in buying cattle this spring, summer grazing is risky as it has ever been and there are Continue reading

Hay Verification Program Summarizes Cost of Production

– James Mitchell, Livestock Marketing Specialist, University of Arkansas

The Arkansas Hay Verification Program is a collaborative effort between Arkansas forage producers, county Extension agents, and state Extension Specialists. The goal of the AHVP is to implement Extension recommendations for increased hay production in accordance with goals established by both the producer and the county Extension agent. The aim is to assist hay producers in Arkansas by improving the production and quality of their hay and forage resources.

Twelve hay fields participated in the 2023 AHVP. Fields participate on a two-year rotating basis. Among the fields participating in 2023, four participated in the 2022 AHVP. Participating farms are from Cleveland, Conway, Dallas, Drew, Faulkner, Marion, Miller, Union, Van Buren, and White counties. Two fields from Cleveland and Dallas counties participated. All twelve fields were warm season forages, which is the current requirement for AHVP.

The table provided above summarizes hay budgets for the Continue reading

Cutout, Weights, and Production

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

While the weekly average Choice cutout has been above a year ago most of this year, some have noted some weaknesses especially compared to higher cattle and calf prices. Last week’s negotiated weekly average Choice Cutout averaged $300 per cwt compared to $297 last year.

Several factors are at work in cutout value. In some ways the market is in the winter-to-spring transition period, moving from winter-time roasts and other end cuts to steaks for grilling season. Primal cut values for chucks and rounds have been declining while the primal loin has been increasing. The rib and wholesale ribeye values have not increased seasonally heading into grilling season. Lean beef for ground beef has soared in value while 50 percent lean has remained depressed.

Steer dressed weights are over 30 pounds heavier than last year, and they have been increasing since February. Normally Continue reading

Second Quarter Weakening Continues

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

Some feeder cattle and calf markets have softened following the futures selloff triggered apparently by the news of HPAI infections in cattle. Still, many regional markets have remained firm through the same period.  The sharpest drops are in some of the smaller and most volatile cash markets for the smallest animals.  Likewise, live cattle futures have retreated substantially in the same window while fed cattle cash market prices are only off modestly.  The disease news has slowed and modestly reversed the likely and anticipated cash market strengthening.

However, from a margin perspective, some of the price adjustments could have been anticipated.  Beef packer margins are as poor as they have been for over a year.  The first quarter typically has the poorest margins and that is Continue reading

Prospective Plantings, Feed Prices and Implications for Feeder Cattle Markets

– Dr. Kenny Burdine, Extension Professor, Livestock Marketing, University of Kentucky

Input prices have been a major topic of discussion over the last couple of years. As I write this, we are enjoying some extremely high cattle prices. But those high prices have been at least somewhat offset by increases in production costs. This has been true of feed, fertilizer, fuel, machinery, labor and many other inputs. On the heels of USDA’s Prospective Plantings report, it seemed to be a good time to discuss recent trends in feed prices and the impact this tends to have on feeder cattle values.

For some recent perspective, the US average corn price per bushel is tracked in the figure above from January 2020 through February 2024. One can quickly see the low-price levels during COVID, price levels exceeding $7 per bushel during 2022, and the significant price decreases seen through the 2023 season. Corn tends to be the market leader and trends in corn price are typically representative of other feedstuffs. Clearly, the Continue reading

Weekly Livestock Comments for March 22, 2024

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

Fed cattle traded $2 higher compared to last week on a live basis. Prices were largely $189 to $191 on a live basis and $301 to $303 on a dressed basis.

The 5-area weighted average prices thru Thursday were $189.52 live, up $1.70 compared to last week and $301.99 dressed, up $3.58. A year ago, prices were $164.39 live and $265.07 dressed.

April live cattle futures have found no direction the past month other than marking time. At the same time, cash live cattle prices have been pushing to achieve the expectations of the futures market for April and have now eclipsed those expectations. Despite this occurrence, live cattle futures are pricing cattle lower through the summer and fall months. Does this mean finished cattle prices will begin to soften as the market moves into May and June? They certainly could, but a lot will Continue reading

Updates from the March 2024 Cattle on Feed Report

– James Mitchell, Livestock Marketing Specialist, University of Arkansas

The USDA’s National Agricultural Statistics Service released a report on March 22, 2024, detailing the status of U.S. cattle on feed inventories. As of March 1, 2024, the total inventory of cattle and calves on feed in feedlots with a capacity of 1,000 plus head stood at 11.8 million, marking a 1 percent increase compared to the figures from March 1, 2023. On-feed inventories remain above 2023 totals for the third consecutive month of 2024. By no means is this an indication of herd expansion at this point. It highlights the differences between short- and long-run cattle inventory dynamics.

Feedlot placements in February 2024 increased 10 percent year over year and 6 percent compared to January, totaling 1.89 million head. This marks the Continue reading

Cow/Calf Producers; Share your insight and help shape the future!

Kate Hornyak, OSU Extension Program Coordinator, Delaware County

Take a minute, share your thoughts, and participate in this eBarn project.

Assist us in shaping the future of beef cattle management by sharing your insights on the breeding practices within your operation. Take a moment to share how you manage reproduction in your beef cattle operation through our quick survey. Your responses will contribute to the OSU Extension 2024 eBarns report, providing valuable insights for other producers.

Your input is crucial, will only take a couple of minutes, and can impact the industry significantly, no matter how big or small your operation might be. Please follow this link now:

Understand the Implications of a Price Slide When Buying and Selling Feeder Cattle

– Dr. Kenny Burdine, Extension Professor, Livestock Marketing, University of Kentucky

Everyone who buys or sells feeder cattle regularly understands that in most markets price per lb decreases as cattle get heavier. This can create a challenge for pricing cattle in situations where weight is not known with certainty. This applies to forward contracts, internet sales and cattle that are sold off the farm but hauled to another location to determine pay weight. In these situations, cattle are often sold with a base weight, and a price slide is utilized to adjust price as the weight of the cattle exceeds that base weight. As an illustration, let’s consider a backgrounder that sold cattle via an internet auction with an advertised base weight of 800 lbs and a price slide of $8 per cwt. Let’s further assume that the cattle sell for $240 per cwt in the auction and will be hauled to a weigh station the following week to determine the pay weight.

If those steers were to weigh exactly 800 lbs, no price adjustment is needed. The pay weight is 800 lbs and the price is $240 per cwt for a total of $1,920 per head. However, if the cattle weighed 850 lbs, the price is adjusted downward because they are 50 lbs above the base weight. With an $8 per cwt slide, the price would be adjusted downward by $4 per cwt (50 lbs is half of a cwt). With a pay weight of 850 lbs and an adjusted price of $236 per cwt, the per head total is Continue reading

Livestock Risk Protection insurance (LRP)

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

A couple of questions concerning Livestock Risk Protection insurance (LRP) were asked this week concerning the cost and choosing coverage levels.

LRP is much more affordable today than it was when the program was first introduced. This is due to the government subsidy, which ranges from 35 to 55 percent. The subsidy is tied to the coverage level. For instance, 95 to 100 percent coverage levels only have a 35 percent subsidy while the lowest coverage levels have the 55 percent subsidy.

In reality, the subsidy level means absolutely nothing to the producer. The important thing is how much it is going to cost to protect a certain value. For instance, the highest coverage level for an early August sale of an 800 pound steer would cost about $60 per head to cover a little more than $2,100 of value. Thus, the total cost on the highest coverage level is about 3 percent of the total value in this example. Research suggests producers should only purchase the highest coverage levels to the tune of 95 to 100 percent coverage.