Cow-Culling Decisions Being Made Now

In mid-summer, cow/calf producers must start making “keep or cull” decisions with their cow herds. Cull cows come to market throughout the year, but prices are seasonally lowest in the fall.

Lower prices for cull cows this year have been lower and tracking the 2010-2014 average because of an increased supply.

This year the US has had more normal price and supply seasonality, and LMIC economists expect the trend to continue.

Prices easily could drop below the 2010-2014 average during the second half of the year if the rate of culling increases, although such an increase isn’t thought to be likely given the relatively young average age of US cows, analysts say.

 

 

SUPPLY UP, PRICES DOWN

 

Among the factors supporting prices are seasonally consistent price and supply relationships in the cull cow market, the LMIC said in its Livestock Monitor.  Included is the decrease in imported beef and a generally increased domestic supply of cull cows.

The USDA’s World Agriculture Outlook Board estimated 2016 US beef imports in its last monthly World Supply and Demand Estimates report at 2.908 billion pounds, down 462 million, or 13.7%, from 3.370 billion in 2015.

For next year, the WASDE report estimated imports of 2.550 billion pounds, down 350 million, or 12.3% from the latest 2016 estimate and down 820 million, or 24.3%, from 2015.

Over the past two years, beef herd inventory growth significantly decreased the supply of cull cows on the market, the LMIC said.  Prices in 2014 and the first half of 2015 reflected this tightened supply by trending up to record levels.

For the first half of this year, cull cow slaughter tracked about 8% above the first half of 2015, the widest difference coming in the second quarter.

That year-over-year increase generally was expected, if nothing else for the fact that older cows held back an extra year will only have a few calving seasons left in them.

But the graph of total cow slaughter is deceiving in that the 2010-2014 average is only that, an average of those five years.  It does not take into account the increased slaughter of the previous five years when the industry was reducing its total herd size.  Slaughter then would have been larger, and averaging the last 10 years of slaughter likely would produce a line that is higher.

Annual US cow slaughter may remain relatively small but growing for the next year or so at least.  Cow/calf producers continue to be profitable, but this profitability is listing, and a growing number of producers may not want to risk investing in a new cow without culling an older one.

Once pastures reach their carrying capacity or producers experience negative returns for a couple of years, the herd may continue to grow.

 

CASH CATTLE MARKET QUIET

 

Cash cattle markets were quiet Monday, with estimated showlists in line with last week.  Cash markets Friday traded $1 to $2.50 per cwt higher at $116 to $117.50 on a live basis and $186 to $188 dressed.

The USDA’s choice cutout Monday was $0.13 per cwt higher at $197.70, while select was up $0.62 at $190.22.  The choice/select spread narrowed to $7.48 from $7.97 with 78 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $144.97 per cwt, up $2.48.  This compares with the Aug settlement Monday of $144.55, up $4.50.