Economists See Cull Cow Prices Fading

The Livestock Marketing Information Center expects cull cow prices this fall to decline compared to recent levels by average percentages.

Forecasts are that fed cattle prices into the first few months of next year will strengthen, but remain below 2017, the LMIC’s “Livestock Monitor” said.  Levels of beef imports and national dairy cow slaughter may be slightly higher year-over-year because of lower milk prices received by producers but are not forecast to be enough to take all the seasonal increase in cull cow price away.

Cow-calf producers that are set-up to add some weight economically to cull cows and then sell in the first few months of 2018 instead of this fall, might want to put a pencil to that soon, the LMIC said.

 

WEANING COMES IN THE FALL

 

The bulk of US beef cattle operations wean calves in the fall, and this also is when they sell off unproductive cows.

Many cow-calf operations in the drought affected Northern High Plains states have already pregnancy checked their cows, which is earlier than normal, the LMIC said.  Many of those cows already have been sent to market.

Over a cattle inventory cycle (typically 10 to 11 years), cull cow prices tend to be lowest in the fourth quarter of the calendar year and generally concentrated in November.  The long-term average decline in cull cow price is about 10% between September and November, although last year’s drop in the Southern Plains was 19%, or about $13.25 per cwt.  (Note that in 2016, December posted the lowest cull cow price.)

Prices then rise into the new calendar year, often rather dramatically.  However, in some years, the new calendar year does not bring much, if any, price increase.  Holding cull cows did not pay from the fourth quarter of 2014 or 2015 into the next year.

Last year between November 2016 and the first several months of 2017, the normal seasonal price increase returned, the LMIC said.  In 2016, per cwt price increases were $5.25 between November and January; $12.00 from November through February, and $20.50 from November through March.

 

SUPPLY AND DEMAND

 

Several factors underpin the seasonal pattern in cull cow prices, the LMIC said.

First, the supply of cull beef cows is largest in the fall, which dampens prices.  After those large supplies are marketed prices increase.

Second, fed cattle prices are typically highest in the winter and early spring months, i.e., February through May, which supports slaughter cow prices.

Other factors that can influence cull cow prices significantly are the level of dairy cow slaughter and the amount of beef imported from Australia and New Zealand.  This beef competes mostly in the “cow-beef” market and not as much with meats from fed steers and heifers.

 

CATTLE, BEEF RECAP

 

Only one lot of cattle sold last Wednesday on the livestock exchange video auction at $163 per cwt on a dressed basis, down $3 from the previous week.

Grudging cash trading was reported last week at $105 per cwt on a live basis, steady to up $1 from the previous week and at $163 dressed, down $2 to $3.

The USDA’s choice cutout Monday was down $0.32 per cwt at $191.56, while select was up $0.41 at $190.38.  The choice/select spread narrowed to $1.18 from $1.91 with 106 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Friday was $149.01 per cwt, up $0.77.  This compares with Monday’s Sep settlement of $148.45, up $0.57.