Cow/Calf Returns Do Balancing Act

Higher-than-expected US 2017 cow/calf producer returns may erode for the next two years, possibly dropping into the red, if beef demand falters in any way, said the Livestock Marketing Information Center.

In its “Livestock Monitor,” the LMIC said cyclically, US calf crops are forecast to continue increasing throughout 2019.  Beef tonnage for 2018 was expected to be record large and should rise again in 2019.

Unless beef demand is much better than anticipated, calf prices were forecast to slip for the next two years, LMIC said.  It’s still possible that fourth-quarter 2018 and 2019 calf prices could remain above 2016’s depressed level, but any faltering in demand relative to 2017 could send cattle prices back down to 2016 levels.




Fourth-quarter 2017 cattle prices were significantly stronger than expected, and the higher returns caused LMIC’s 2017 calculated cow/calf returns over cash costs plus pasture rent to be revised upward.

The LMIC’s original forecast was for returns to be negative, but they now look as though they will be positive.

Since the mid-1970’s, the LMIC has estimated annual cow/calf returns based on a typical commercial full-time spring calving and fall weaning operation.  It said the estimates were not survey based and were developed for market analysis purposes.  Calculations only include cash costs of production and pasture rent.  Management and labor costs and returns, etc., were not included.

Using the USDA’s mid-November Southern Plains auction prices, the LMIC projected fourth-quarter 2017 steer calves weighing 500 to 600 pounds would be in the upper $160’s per cwt, a year-over-year increase of $28.00 to $29.00 per cwt, or about 21%.

Compared with the last quarter of 2015, Southern Plains steer calf prices this fall were projected lower by $36.00 to $37.00 per cwt, or about 18%.

But several demand factors came together supporting cattle prices despite a calf crop that was estimated to be the largest since 2007, with more beef production than in any year since 2010.




Foreign demand was better than expected, the LMIC said, resulting in record-large US beef exports.  Packer demand for slaughter-ready animals was robust and helped pull animals through feedlots, keeping slaughter weights below 2016.

Additionally, US retailers battled for customers with active beef featuring, while a robust economy bolstered consumer incomes and reduced unemployment levels, factors supporting spending on beef meals at home and in restaurants.

For the year, per-cow cash production costs were slightly higher compared with a year earlier.  Many areas of the US experienced natural disasters from drought, wildfires or flooding, which spiked local production costs.

The LMIC estimated cow/calf returns peaked in 2014, surging to about $535.00 a cow.  However, by 2016 the return had crumbled into the red (-$21.00 per cow).

For 2017, the average LMIC calculation was for a positive $69.00 per cow–about the same as 2011.




Cash cattle trading began last week at $118 per cwt on a live basis, down $1 from the bulk of last week’s action.  However, more trade came late at $120 to $120.50, up $1 to $1.50.

The USDA’s choice cutout Friday was up $1.98 per cwt at $210.99, while select was off $0.79 at $187.85.  The choice/select spread widened to $23.14 from $20.37 with 62 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Thursday was $155.58 per cwt, down $0.78.  This compares with Friday’s Jan settlement at $153.30 per cwt, up $0.57.