The new challenge for cattle producers is to keep 2018 going.
US cattle producers have said for years they will produce the kind of cattle with the carcass traits they are paid for. In 2018 they did just that, increasing the percentage of choice carcasses versus select and keeping product demand strong as packers came into the year paying premiums for higher-eating-quality carcasses.
Packers can afford to scale back their bonus payments for higher-quality carcasses now because overall slaughter rates are up. With more fed cattle slaughtered, more choice and prime-grading carcasses will come through, satisfying the demand.
THE BEEF INDUSTRY MIRACLE
In a letter to Extension agents, Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel, called the day-to-day performance and accomplishments of the US beef industry “amazing.” Beef production last year is projected to total nearly 27 billion pounds from the slaughter of 33 million head of cattle amid a “remarkably complex” economic and production system that connects cattle production to beef consumption.
Another analyst said that the US system is very complex and fluid, unlike almost any system anywhere else in the world. Cattle can be produced on a farm or ranch and change hands multiple times before finding its way to a slaughter/packing facility. In most other countries, this exchange of cattle ownership is much less graceful, and cattle can spend their entire lives on one farm.
But such a system also is much less efficient in that transportation and exchange costs can be overcome by the efficiency of scale the US system offers.
CONTINUOUS FLOW TO PACKERS
In order to meet fresh beef demand, a continuous flow of slaughter-ready cattle must be available throughout the year, Peel said. The flow of fed cattle into the US packing industry is the result of multiple production sectors and a lengthy production process.
The majority of US cattle slaughter is young cattle finished in feedlots in a five- to six-month feeding phase, Peel said. Prior to finishing, many of these cattle grow in a stocker or backgrounding phase that typically lasts from four to six months.
Stocker cattle are calves typically weaned at seven to nine months of age, Peel said. This means cattle are slaughtered at roughly 18 months of age, with adjustments in any or all of these production phases resulting in a range of slaughter age from 15 to 22 months or more.
Add to that nine months of gestation to produce a calf, and the total time between fresh beef for consumers and a rancher’s decision to turn out the bull is more than two years, Peel said.
FURTHER COMPLEXITY
Additionally, there are many other dimensions of cattle production that add to the industry’s complexity, Peel said. Cattle production occurs all over the country in a wide range of climate conditions ranging from semi-tropical to subarctic.
Cattle are ruminants and able to use a wide range of feed resources which add flexibility to cattle production but also add to the challenge of adjusting cattle production in response to dynamic market conditions and climate, Peel said.
CATTLE, BEEF RECAP
Cash cattle traded last week at $123 per cwt on a live basis, up $4 from the previous week, and at $195 dressed, up $5.
The USDA choice cutout Wednesday was up $1.29 per cwt at $216.64, while select was up $0.25 at $210.91. The choice/select spread widened to $5.73 from $4.69 with 65 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $144.49 per cwt, down $0.15. This compares with Wednesday’s Jan settlement of $147.95, down $0.90.