2016 A Tough Year For Cow/Calf Producers

For cow/calf producers, 2016 will go down as a tough, tough year as calf prices in many cases have not covered the cost of feed, labor, management and investment.  Some are beginning to wonder if what has been a growing US cattle herd could turn suddenly into a declining herd.

That could be a reason the cow slaughter rate is climbing in relation to last year.  It could have less to do with drought in Southeastern states and more to do with the bottom line.

Subsequent futures prices for the last several months have been lower, prompting some, if not many, cow/calf producers to keep their calves on pasture longer than normal.  For many market analysts this accounts for much of the less-than-expected feedlot placements this fall.

Many of those unplaced calves may also have been retained for feeding at the farm and thus will not be counted in the USDA’s official monthly Cattle on Feed report.




Pressure on calf prices is nothing new and has been reported extensively in this space since the middle of last year.  Discussion also has been extensive about rising feeder and fed cattle weights.

Harlan Hughes, a North Dakota State University professor emeritus and author of the monthly “Market Advisor” column in “Beef” magazine, said in his latest article this week that the combination of increased cattle numbers and the rising weights provides at least a partial explanation for the price pressure in response to the current expansionary cattle cycle

In fact, Hughes said in the BEEF article that current feeder cattle prices could cause him to re-evaluate herd-size projections for 2017 and beyond.

For the years before 2015, many cow/calf producers experienced positive margins, which was the reason for the overall expansion in the US herd from about 2010 or 2011.




The stark drop-off in cow returns will result in a selloff in the cow herd, Hughes and other economists said.  The increase in 2016 cow slaughter indicates this process may already have begun.

But because things happen slowly in the cattle business, an actual downturn in the US herd size may not be recorded for another year or more.  Farmers and ranchers have too much invested for a quick reversal of plans and a rapid sell-off of cows.

For that reason, the reported peak in herd size may not come until the January 2018 or 2019 report, and that means more feeder cattle will hit the market, keeping pressure on prices.  Any sustainable increase in calf prices likely will have to wait until a more documented decline in cow numbers.




Superior auction prices last week were $1 to $2 per cwt lower at an average of $110.31, down $2.20, in a range from $111.75 to $112 in the south to $109 to $111 in the north.

Cash action then got underway at $111.75 to $112 on a live basis, fading to $110 later.  Dressed-basis trading was reported at $169 to mostly $170, down $5 to $6.

Futures action this week has sellers looking for higher prices.

The USDA’s choice cutout Tuesday was $2.17 per cwt higher at $191.73, while select was up $1.39 at $175.34.  The choice/select spread widened to $16.39 from $15.61 with 95 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $130.14 per cwt, up $0.11.  This compares with Tuesday’s Jan settlement at $128.97, up $0.42.