It was a quiet week in the cattle markets. Fed trade was pretty much steady with last week, which had a huge negotiated cash sales volume of 130,000 head traded, and the week before was at around 110,000. It looks like this last week will produce a big cash volume too. Trade was between $140-150, and the weighted average was $145.06. This should produce some profits for cattle feeders.
Feeder cattle markets moved higher as well. When cattle feeders make a little money, they turn around and buy more feeder cattle. Feeder cattle futures had good Monday trade, with most contracts moving up $5. The deferred feeder cattle contracts have moved back into the $180 zone, which is amazing since your cost of gain in the feedlot is at $143 per cwt. Corn prices have fallen just below $8, and the CME Feeder Cattle Index is at $155.75.
Many market analysts are telling us that there are 850,000 fewer feeder cattle available this year compared to last year. Many have already found their homes in feedlots, but there will be far fewer feeders available this fall.
Cow slaughter through April 16 is running 17.2 percent above last year, at 1.125 million head compared to 960,900 head. Typically, annual beef cow slaughter is between 3 to 3.6 million head a year. Also, fed heifer slaughter is 2 percent higher than a year ago. The nation’s cow herd is getting much smaller. However, UDSA is projecting higher beef production this year because of liquidation.
Derrell Peel, Oklahoma State University Extension economist, ran the numbers and wrote: “The current pace of beef cow slaughter suggests an annual beef herd culling rate of 13.8 percent, a record in data back to 1986. The beef cow inventory would likely decrease by 4 percent year over year with the January 1, 2023, inventory dropping below 29 million head. This would be the largest annual beef cow herd decrease since the mid-1980s. The current beef cow slaughter pace will probably not continue all year. For annual beef cow slaughter to average, say 13 percent higher year over year, average beef cow slaughter for the remainder of the year would have to average 11.6 percent. In that example, net beef herd culling would still be over 13 percent this year. The result would likely be a January 1, 2023, beef cow inventory in the vicinity of 29 million head, down over 3.5 percent year over year.
“If annual beef cow slaughter equaled last year’s 9 percent year over year increase, slaughter would have to average 6.1 percent higher year over year for the remainder of the year. That level of decrease in the slaughter rate (from the current 16.9 percent rate) seems unlikely at this point. In this case, the net herd culling rate would be just under 13 percent (though still a record level) and the 2023 beef cow herd could be roughly 29.2 million head, down about 3 percent year over year.”
The big cattle industry hearings held a couple weeks ago were remarkable in that the Senate seems intent on helping or hurting the cattle industry depending on your perspective. I don’t hear much talk in the country about cattle markets now that they have changed a bit. These issues have become a Washington political platform more than anything. The Senate worries me.
Word is they are looking to mark up the bill toward the end of May. This would be surprising because the Senate never moves that quickly, especially with so many other priorities.
In Congress, things seem a bit more divided. They really haven’t rallied behind any real legislative proposal. The House Ag Committee seems a bit misguided, with Chairman David Scott (D-GA-13) asking packers a silly question about if there was any collusion when beef prices went up after the last drought. And the rest of the committee didn’t seem to invest much effort into learning about meatpacking other than knowing meat prices are up due to labor and transportation costs.
We’re starting to see some primary races, and I’d have to say that by July, this beef talk will be almost over because they will be in full-on campaign mode, which means that very little will get done in the House of Representatives. They would have to take up any issues in the new Congress, and by then, they may not have the will, especially if Republicans take over both the Senate and the House.
All we need in this industry is feed, fuel and to get inflation under control. And of course, pray for more spring rains. — PETE CROW
