After playing with lots of numbers and assumptions, Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel’s best guess is that the drought has added 0.5% to 1.0% of additional beef herd liquidation this year.
But it’s hard to tell, Peel said in a letter to Extension agents called Cow/Calf Corner.
BEEF COW SLAUGHTER UP
Beef cow slaughter is up 8.7% over 2020 through mid-August, Peel said. Assuming this increase continues for the rest of the year, it implies an annual beef cow slaughter of 3.55 million head, a net culling rate of 11.4% and the highest beef herd culling rate since 2011.
The average annual culling rate since the 2019 peak has been 10.25%, he said. Across the past 35 years of expansion and liquidation, the average annual rate has been 9.65%.
However, because the drought carried over from last year, it’s likely that beef cow slaughter shifted earlier in the year, Peel said. Producers likely have already culled cows that would have been culled later in the year.
He doubted the 8.7% slaughter rate would persist for the rest of the year, although the drought continues unabated, and cow slaughter rates likely will remain strong.
COW KILL ONLY PART OF THE STORY
Cow slaughter is only part of the herd-liquidation story, Peel said. It is less clear what is happening with heifer retention.
The January Cattle (inventory) report showed beef replacement heifers were 18.7% of the cow herd, a level that would support stable herd inventories.
The total number of beef replacement heifers and the subset of heifers calving in 2021 were fractionally higher than 2020 in the January numbers, he said. There’s little doubt producers in drought areas have had to adjust replacement heifer numbers along with cows. Some heifer calves indicated as replacements in January likely were shifted into feedlots, but it is not clear how many.
2021 heifer slaughter is up 1.4% year to date, but year over year comparisons are difficult because of pandemic effects last year, he said. Coming first calf heifers in January may have gotten sold out of drought areas and moved to other parts of country.
The July Cattle report showed a 2.3% decrease in beef replacement heifers.
Finally, there is the question of how producers not in drought areas are behaving, Peel said. Forage conditions have been good in some regions, and it is not clear if producers may be holding more cows and heifers to offset some of the drought region effects.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $122.43 to $126.50 per cwt, compared with last week’s weekly range of $125.41 to $126.44. FOB dressed steers and heifers went for $192.44 to $202.64 per cwt, versus $198.02 to $199.92.
The USDA choice cutout Wednesday was down $3.66 per cwt at $338.45, while select was down $4.46 at $307.57. The choice/select spread widened to $30.88 from $30.08 with 77 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.
The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.60 to $2.00 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.40 over Sep, which settled at $5.15 1/2 a bushel, down $0.18 1/2.
The CME Feeder Cattle Index for the seven days ended Tuesday was $158.35 per cwt down $1.19. This compares with Wednesday’s Sep contract settlement of $162.92 per cwt, down $0.07.