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From our website statistics, we've had great utilization of the website.  We would like to do a producer highlight for the website and for the Southern Risk Management Education Center.  If you are using this website on a regular basis to obtain marketing, outlook, and production information for your cattle operation, we would like to use your information.  Please send an email to secattleadvisor@gmail.com, and we will contact you.

Thanks!
The Southeast Cattle Advisor Team

 

Chart of the Week (COW) - May 14, 2012

Chart of the Week - February 11, 2012

Trends . . . December 1 Hay Stock Shrink

Katelyn McCulloch - Livestock Marketing Information Center

Hay stocks are short. Drought induced hay use was a market topic for much of the year, reflecting dire conditions especially in the Southern Plains. Perhaps the December 1 hay stocks wasn’t the most anticipated item by USDA-NASS this month, but it certainly put this year in perspective when compared to history. The U.S. usually holds about 102 million tons of hay on December 1 (35 year average). This crop-year December 1 hay stocks were at 90.7 million tons, 11% below a year ago and the smallest December stock figure since 1988.

By region, it came as no surprise many states reported year-over-year declines in hay stocks. In the continental U.S. (Hawaii and Alaska are unreported), 25 states were below a year ago. Texas posted the largest year-over-year decline down a full 60%, followed by Georgia (41%) and Oklahoma (38%). States with the largest increases had large declines the previous year creating larger year-over-year gains as of December 1 – Virginia (50%), Utah (35%), and Mississippi (26%) were at the top of the that list.

Hay prices are expected to be high again in the coming marketing year. Acreage competition will again affect hay in most states. New seedlings of alfalfa are down 8% nationally. However, states such as Nevada, Arizona, and California indicate new alfalfa seedlings’ are greater than 40% above a year ago. Another concern for hay prices is impending dryness across the Southern states. Last year, Texas and Oklahoma had the benefit of above average May stocks to cushion effects of the poor pasture and range conditions. Another dry year without a cushion would likely lead to record high prices, again.

Hay 1 stocks are already looking slim; however, a mild winter has left more than adequate feed for cattle this winter in the western half of the country. Many states that are usually under snowpack have been able to continue to let their cattle feed on pastures, cornstalks, and other forages reducing the amount of hay used. In comparison, an area of the country that may have surprisingly low May 1 stocks is the Northeast and Mid-Atlantic states, where winter has not been so mild and a devastating mid-summer hurricane impacted production and stocks. Nationally, May 1 hay stocks are forecast to be well below a year earlier (likely 20% to 25% below a year ago) and the smallest since May 1, 2006.

 

Chart of the Week - January 30, 2012

Survey Says,....Fewer Cows

Dr. Curt Lacy University of Georgia

On Friday, January 27, USDA-NASS released the much anticipated Cattle Report.  This annual report is the one report most cattle market forecasters hang their hat on because it contains all of the reported inventories of beef cows, dairy cows, total cattle and calves, as well as a whole host of other cattle statistics.

For beef cattle producers, the most important numbers reported were a decline in the beef cow herd of almost 1 million head to 29.88 million cows.  This drop of 3 percent was below the average of most forecasters but well within the range of expectations. 

The severity of the ongoing drought was made evident by the reduction of almost 1 million cows.  Virtually all of this reduction came from Texas and Oklahoma where beef cow inventories were down 948,000 compared to one year ago.

In the Southeastern US (AL, FL, GA, SC, NC, and TN), beef cow numbers decreased by about 12,000 cows (Figure 1) to 3.9 million.  That number is a little misleading though as Alabama and Tennessee were the only states to report decreases.  All other states either remained steady or increased their numbers.

 

 

It is interesting to note that even though beef cow numbers were down for the US and the Southeast, heifers held as replacements were up compared to 2011.  For the US, the number was up 1 percent to 5.2 million. 

In the Southeast, heifer numbers were up not quite one percent to 532,000.  Curiously, all states in the Southeast reported either an increase or no change in heifer retention numbers.  Even Alabama and Tennessee who reported net beef cow reduction actually increased their heifer numbers by 6,000 head.

So, what does all of this mean?  In short, higher prices.  The drop in beef cow numbers was slightly larger than expected and replacement heifer numbers were higher than expected.  While it is too early to say that herd expansion is under way, it is safe to say that feeder cattle supplies will be reduced this year. 

How much weight buyers and traders put on this information is hard to say at this point.  However, it is hard to see how any of this is not good news for cattle markets for the next few years.

 

Chart of the Week - November 11, 2011

Sell 2011-2012 Calf Crop Now??

Dr. Curt Lacy, University of Georgia

Early November is not a time when many cattlemen consider selling calves for next summer or fall.  Perhaps this year they should.  The following chart depicts the CME Feeder Cattle futures closes for November 10, 2011.  By reviewing the chart cattlemen should be able to see that favorable prices are projected for most of next year. 

By using futures and/or options, cattlemen who market in truck-load lots could manage some or all of their sales price risk for next year.  By using historical basis estimates we can predict with considerable confidence that 500-600 pound steers in the Southeastern US will bring $0-$5/Cwt. more than the futures price while 700-800 pound steers will bring approximately $10-$15/Cwt. less than the appropriate futures price. 

Based on this information, it is quite possible that cattlemen with calves to sell next August and September could “lock-in” $150-$155/Cwt. for 500-600 pound steers and $135-$140/cwt. for 700-800 pound steers.  While the current supply and demand fundamentals certainly support these prices or perhaps even higher prices next year, it may be a good idea to have at least some of next year’s required revenues “guaranteed” just in case the market does break.

Cattle producers or others who are unsure of how to use futures and options to manage their price risk  should contact their local county agent or the Southeast Cattle Advisor at secattleadvisor@gmail.com.

 

Chart of the Week-September 24, 2011

September Cattle on Feed Report contains major surprises - in a good sort of way

Dr. Curt Lacy, University of Georgia

The September Cattle on Feed report delivered by USDA on September 23, 2011 surprised the industry with some good news.  According to the report, on September 1, 2011 there were 10.7 million head of cattle on feed in feedlots with over 1,000 head capacity.  While this number is 5 percent above September 1, 2010; it was noticeably less than what private analysts were anticipating (see chart below).

In many instances, it is the difference between what the report actually says and what traders were expecting that causes significant short-term movements in markets.  For this particular report, the panel of analysts that were surveyed prior to the report’s release guessed wrong, to the likely benefit of cattlemen, for the major indicators.  Basically, traders overestimated the number of cattle that were placed in August, underestimated the number marketed during the month and overestimated how many were actually on feed.

Other important facts reported by USDA include:

• Total marketings totaled 2.05 million, 7 percent above 2010. 
• Total placements were 2.25 million, 1 percent below 2010.
• Average placement weights continue to be below those normally seen for this time of year as cattle weighing less than 600 pounds were 44 percent the numbers placed last year for the same time period.
• Placements in TX were 14 percent year ago levels while those in Iowa were 2 percent below one year ago.  This is yet another indication of the severe drought conditions.  It also seems to confirm what many have been reporting and that is, some brood cows are being sent to feedlots in hopes of returning them to the ranch when it finally does rain.

The primary implication is that feeder and live cattle prices should be higher in the next few days unless of course the negative economic news carries more weight with traders.

 

Chart of the Week-August 26, 2011

OUTLOOK IS FOR FEEDSTUFFS TO REMAIN VERY EXPENSIVE

Livestock Marketing Information Center (LMIC) Staff

On August 11th, USDA-NASS lowered their 2011 crop production forecasts for major feedstuffs and the WAOB raised USDA’s price forecasts. The estimated national average corn yield was reduced to 153 bushels per acre, a decline of nearly 6 bushels from the month-earlier forecast and below industry expectations. The national average sorghum yield was reduced by nearly 11 bushels per acre compared to one month ago, due to drought in the Southern Plains. For soybeans, the national yield was reduced by 2 bushels per acre over the last month.

USDA-WAOB raised their national average corn price for the 2011-12 crop marketing year dramatically to a record-high range of $6.20 to $7.20 per bushel, an increase of 70 cents per bushel. Sorghum prices were raised by 90 cents per bushel and soybean meal was increased by $10.00 per ton (national price range of $355.00 to $385.00 per ton). By-product feedstuff costs, like dried distillers grain and cottonseed, will continue to be very expensive too. In fact, some regions that traditionally feed cottonseed meal to livestock may switch to less expensive soybean meal; U.S. cotton acreage harvested was reduced by USDA to reflect expected abandonment at 30% of plantings due to drought.
USDA-NASS indicated large hay production reductions in the latest Crop Production report. For example, hay production this year in Texas now looks to be about half of 2010’s. Nationally, alfalfa hay production will be down at least 4% compared to 2010’s. Drought is mostly reducing other hay production. USDA estimated other hay production this year will be 14% or 10.7 million tons below a year ago. According to LMIC forecasts, hay prices nationally will be record high this year, with all types of hay averaging about 50% above a year ago.

Chart of the Week-July 11, 2011

Feeder Cattle Prices Begin Seasonal Increase

Dr. Curt Lacy, University of Georgia

700-800 feeder steer prices in the Southeastern US tend to reach their annual peak in July and August.  This year appears to be following the same pattern. 

Unlike calf prices that saw a substantial price decline a few months ago, feeder prices have remained fairly stable. In addition to the seasonal aspect, two major factors have contributed to the strengthening feeder cattle prices: tightening feeder cattle supplies and decreasing corn prices.  The combination of these two fundamental factors have allowed feedyards to bid up prices for feeder cattle in recent week.

Producers preparing to market feeder cattle in the next few weeks can look forward to stable to increasing prices barring a major market schock.  However, they should make plans to have most of their marketing done by October when cattle prices tend to deteriorate rapidly.

 

 

Chart of the Week, June 8, 2011

The following article is taken from the Cow-Calf Corner newsletter published by Oklahoma State University.

Drought Likely to Impact Cattle Markets for Years

Dr. Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

The on-going drought in the Southern Plains and surrounding regions is having immediate market impacts and, with each passing day is increasingly likely to have multi-year impacts in the future.  It is difficult to determine the exact impacts of the drought but some indications are emerging.  The contrast between beef cow slaughter nationally and in the drought region clearly indicates that the impacts are significant.  For the year to date, beef cow slaughter is down 4.4 percent nationally, while beef cow slaughter in Region 6, which closely corresponds to the drought area, is up 11.7 percent.

Measuring the drought impacts is difficult since it is impossible to know for sure what would have happened without the drought.  However, analysis of typical slaughter patterns and tendencies suggests a range of impacts that probably captures the drought impact.  At a minimum, Region 6 beef cow slaughter at the same rate (relative to the cow herd) as last year (which implies additional herd liquidation) would suggest about 49,000 head less slaughter than last year.  This would result in a national slaughter rate that would be down 7.7 percent compared to the observed rate of 4.4 percent for the year to date.  Moreover, a Region 6 slaughter rate that is closer to the long term average regional rate would suggest that an additional 100,000 head of cows are added to total beef cow slaughter so far this year due to the drought.  Adjusting for this would put the national rate over 11 percent less for the year to date.

 

For the entire year of 2011, it appears that beef cow slaughter could have decreased roughly 10 percent year over year in the absence of drought, a value that is consistent with herd expansion.  However, the additional 100,000 head of culling already estimated implies that the annual beef cow slaughter rate would be limited to a decrease of 7-8 percent.  And that assumes no additional drought-induced culling for the remainder of the year.  The drought is still very much in place and more culling is likely.  Projecting the current rate of slaughter for the southern plains for the rest of 2011 would result in a national beef cow slaughter rate that decreases only by 3 percent.

 

The resulting drought impacts may have implications on the cow herd for several years.  My early projections showed that it might have been possible to stabilize the beef herd this year but only under the most favorable circumstances.  Even without a drought it was likely that the cow herd might decrease another 0.5 to 1 percent in 2011.  Depending on how much additional drought liquidation occurs beef herd liquidation upwards of 2 percent is increasingly likely.  If the drought impacts stop now, the additional cow slaughter that has already occurred would likely result in beef herd liquidation of close to 1.5 percent for the year. The additional herd liquidation will extend and exaggerate the current reduced animal inventories by at least another year.  Herd growth rates will be limited when they finally do start so it is likely to take at least 4-6 years for any significant herd rebuilding.

 

Chart of the Week, April 22, 2011

Dr. Curt Lacy (UGA)

On April 21, USDA released its monthly Cattle on Feed (COF) report.  While the report indicated a larger number of COF compared to a year ago, there is more to the story than many might think. For starters, the year over year increase really illustrates the impacts of the drought in Oklahoma and Texas as numbers of stockers and feeders were moved from pastures to feedlots.  Also of import are several facts that should be supportive of feeder cattle prices: total cattle on feeder were LESS than trade expectations, cattle placed in March were LESS than traders expected and cattle marketed in March were MORE than pre-report expectations.

All of these pieces of data serve only to underscore how tight supplies of feeder cattle are.  Of course, there is still uncertainty about the impacts the impacts of higher beef prices at retail and high-priced corn on feeder cattle demand.  Absent these concerns, fundamentals for feeder cattle prices remain bullish.

 

 

Chart of the Week, March 13, 2011

Dr. Curt Lacy (UGA)

An interesting phenomenon that has been occurring during the recent run-up in feed prices has been the consistent spread in calf and feeder prices (see chart below).  Back in 2008 when feed prices reached their historical highs, the spread between 500-600 pound steers and 700-800 pound steers narrowed to $3.52 per hundredweight a much smaller difference than the normal $13.50.  Currently the spread between calves and feeder cattle is actually at a 5-year high at roughly $24 per hundredweight.  So what gives?

There probably is not one item that answers this question.  However, there are several things to consider.  First, live cattle prices for the foreseeable future are above $115/cwt.-much higher than they were in 2008.  Second, we are in the time of year when demand for lighter-weight calves is typically stronger than any other time of the year as graziers are looking for cattle to run on summer pasture and then sell as feeders later in the summer or early fall.  This situation is buttressed by the fact that feeder cattle futures for August and October currently exceed $135/cwt.  As a result, many buyers are likely buying stockers to put on grass with hopes of either selling them at roughly $125 later in the year at heavier weights or holding on to them and retaining ownership in the fall.  It is also quite possible that some buyers have already hedged this spring’s calves using live cattle futures with plans of putting cheap grass gain on during the summer and then feeding them this fall with hopes that corn prices will be lower then.

Bottom line, while things may seem very similar to three years ago, they are actually quite different. 

 

Chart of the Week,March 3, 2011

Dr. Curt Lacy (UGA)

Calf prices have continued their meteoric climb.  Since the first of the year, 500-600 pound calf prices have averaged almost $125 per hundredweight.  For some perspective, this is 27 percent higher or $26 per hundredweight more than for the same time period last year.  More importantly, these higher prices translate into almost $150 per calf more than just one year ago.

Going forward, cattlemen can be encouraged by the tight supplies that are supporting these prices.  However, there are concerns about the impacts of impending higher beef prices and creeping consumer inflation.  As a result, cattle producers should continue to keep an eye on markets as well as corn and crude oil prices.

Chart of the Week, February 15, 2011

Dr. Curt Lacy (UGA)

500 pounds calves sell for $125/cwt. plus! Slaughter cattle selling for $105+, what could possibly go wrong?  Plenty.

The chart below shows the very strong relationship between corn supplies and prices.  Given what we know about the tight global grain supplies, producers are strongly encouraged to keep a close eye on the corn market as that price plays a very critical role in in what feedyards will pay for our cattle.  The bottom line is any weakness in the Live Cattle market and continued strength in the corn market could have southeastern cattle producers "upside down" in a hurry.

 

 

Chart of the Week, February 4, 2011

Dr. Curt Lacy (UGA)

Recently calf prices have been the highest in several years.  The primary driver behind the higher calf (and slaughter cattle) prices has been the very strong wholesale price of beef. 

The boxed beef cutout value is the industry term for the weighted-average wholesale price of beef.  In other words, the different wholesale values of the loin, chuck, round, brisket, etc. are each assigned a “weight” that reflects their relative proportion of a beef carcass. 

The main point is that in recent weeks we have seen composite wholesale prices above $170-a level above which we have only ever exceeded twice and that was last year!  The implications are that combined with last week’s favorable cattle inventory report and improving consumer demand, prices should remain very favorable for the forseeable future.  While persistent prices above $170 is not a given, wholesale boxed beef prices should remain above $160 for quite some time.

 

Chart of the Week, January 28, 2011

Dr. Curt Lacy (UGA)

On Friday, January 28, USDA released the annual Cattle report.  This year’s report had several interesting findings. 

Total beef cows that had calved were reported to be 30.86 million head, down 2 percent from last year.  Heifers held as beef replacements totaled 5.16 million down 5 percent from 2010.  Overall, the U.S. beef cow factory (beef cows plus replacement heifers) shrunk by 790,000 head or 2.1 percent. 

These numbers came in right at pre-report expectations.  The short-term effects are likely to be firmness in deferred feeder and live cattle futures as it is apparent that the cow herd is not expanding.  The long-term implications are that prices will have to increase above current levels to entice cattlemen to begin expanding the herd.

 

Chart of the Week, January 21, 2011

Dr. Curt Lacy (UGA)

The chart below demonstrates the amazing run we have experienced in the cattle market in recent weeks.  For the week ending January 21, 2011, prices for 500-600 steers and bulls grades 1-2 averaged 122.23, 22 percent higher than the five-year average and 28 percent above the same week last year.  Many producers have questions about how long this rally can continue.  The answer is, no one really knows.  What we do know is, that with the extremely tight supply situation and robust beef demand, the current fundamentals support continued strength in the feeder cattle market.  The major risks continue to be feed prices, increasing fuel costs and the struggling economy.

(click here for a larger view of the slide)

This Web site is a collaborative effort between cooperating universities, USDA-CSREES and the Southern Region Risk Management Education Center.