Kentucky Beef Cattle Market Update

 

After holding pretty well through the early part of the fall, Kentucky calf markets finally made their seasonal drop in October and November. As can be seen in figure 1, prices for a 550 lb steer fell by roughly $10 per cwt from September to November. This may have been slightly more decline than usual due to delayed marketings from fall forage growth and cold / wet conditions in November. Regardless, we are at our typical seasonal lows for the calf markets and prices tend to increase from now until spring. Heavy feeder cattle prices have decreased as well with large groups of 850 lb steers largely in the $140’s. Many of these groups were in the $150’s a month ago.

 

 

 

Source: USDA-AMS, Livestock Marketing Information Center, Author Calculations

 

I have gotten a lot of questions about cull cow prices over the last several weeks. Put simply, this cull cow market has gotten ugly. Figure 2 shows 80-85% boning cow prices through November, which have moved to around $40 per cwt on a state average basis. I’m also hearing some stories of cull cows bringing much lower than this or not being sold at all. It’s always difficult in my roll to sort out how wide-spread these instances are. The Kentucky Livestock and Grain Market Report from the Kentucky Department of Agriculture for the week ending December 1, 2018 showed a range on average boning cows of $29 to $52 per cwt. Regardless, cull cow prices have dropped a lot since summer and this is impacting cash flows for cow-calf operations.

 

As is often the case, I think it’s a combination of factors that are impacting our cull cow prices. First, cull cow markets typically have one of our more predicable seasonal patterns and we are right at our typical seasonal lows. We tend to sell more culls this time of year, which explains this pattern from the supply side. And, the impending winter makes them less attractive to buyers that might consider keeping them for a period of time.

 

Secondly, I think there are some additional factors that are making the seasonal drop even worse in 2018. Beef production continues to increase and boxed beef prices have moved lower in response. Beef cow slaughter has also been higher this year and given the challenging dairy margins, dairy cow slaughter is up as well. Don’t ever underestimate the impact of dairy cows on the cull cow market. Although dairy cow inventory is much smaller than beef cow inventory, the productive life of a dairy cow is much shorter.

 

Third, I have talked a lot recently about increased competition in the meat case from higher pork and poultry production levels. My colleague in Oklahoma, Dr. Darrell Peel, made a point in Oklahoma State’s Cow/Calf Corner newsletter that I think is worth sharing. He suggested that increased pork and poultry supplies, may be having a larger impact on ground beef, than on middle meats. Given that retail prices for most pork and poultry products are more comparable to ground beef, than to steak prices, I think there is some logic in this notion. And, since cull cows tend to be a largely ground beef market, the impact on cull cow prices would be significant.

 

 

 

 

Source: USDA-AMS, Livestock Marketing Information Center, Author Calculations