Trends in the cattle industry are cyclical, and this year has seen a repeat from the past decade, with drought and a lack of forage forcing producers to reduce their herd size. But, ranchers can have a sigh of relief, as beef demand has never been higher, and the feeder market is selling at record high levels.
Currently, the climate conditions in Nebraska and southern South Dakota are similar to most of the West and southern U.S., according to Greg Arendt, manager of Valentine Livestock in Valentine, NE. Greg references 2012 as the last severe drought, but he thinks 2022 will top the 2012 drought.
Greg has managed Valentine Livestock and lived in Valentine since 1993. Through the last 20 years, the region has experienced excessive moisture, and records were actually set for annual rainfall in 2019, Greg said. He added this makes ranching in the region extremely difficult to operate. The Sandhills are somewhat drought resistant because of wet meadows, Greg said, yet three years ago, they were too wet to make quality hay, and this year they will produce less than 50% of a hay crop. This could be the driest year in over 100 years, Greg noted.
Current feedstuff supplies are at record price levels, forcing ranchers to make decisions about whether to buy $200/ton hay or sell cows. “I anticipate a big increase in bred cows numbers by December,” Greg told WLJ. “Older cows and either heifer calves or fall cows will sell as well.”
Greg said they will adjust their sale schedule to accommodate the increase in bred cow numbers, and the timeline for selling spring calves is moved up two to three weeks earlier. “A footnote to a lack of hay: Many ranchers will either take cows to cornstalks or put calves in a backgrounding yard,” Greg said, adding that the normal marketing behavior for their customer will change.
Even with feed costs higher than 2021 and ranch expenses up 20-30%, the feeder market on yearlings is up $200/head over a year ago, he said. The calf market is expected to be up about the same per head.
Beef demand has been at levels not seen for some time. Fats trading near $1.50/cwt keep the feeder market at high levels, Greg said. However, with high feed costs versus high fat prices, you would think the feeder market would back up, Greg noted, yet in his area, it has not. At the auction market’s Aug. 25 sale, over 500 steers averaging 931 pounds brought $189.42, and 457 steers averaging 829 lbs. brought $196.80.
With such good prices paid for replacements, someone thinks this market is on course to be good into 2023, Greg said. USDA reports cow kill up 14-16% this year, and the drift of this information has many thinking replacements will be scarce in 2023, he said. Time will tell, Greg added. If “normal” comes back into place in 2023, bred females will certainly cost more.
He is hopeful the cow-calf sector will have three years of sustained price improvement. The last upward trend fizzled because of the repeal of mandatory country-of-origin labeling (MCOOL), Greg said. “Maybe MCOOL could get reinstated and make this calf market stay at $2/lb. or better. MCOOL would provide leverage back to the U.S. cow-calf individual,” he said.
“We are hopeful the Cattle Price Discovery and Transparency Act—also known as the Grassley/Fischer bill—brings about a more level playing field. Auction markets play a vital role in our industry,” Greg continued. “They are the price trendsetters. Video has surfaced to be a big player in selling feeders and replacements, yet people look at auction markets for price trends.”
As Greg prepares for the fall run, he is hopeful that rain will start before October and the winter won’t be too long, keeping the burden of cow herd reduction to a minimum. — WLJ
