Market Challenges

Fall Sales Disappointing Some Cow-Calf Producers

Victoria G Myers
By  Victoria G. Myers , Progressive Farmer Senior Editor
While the overall trend appears to be positive for the beef industry, cow-calf producers are struggling in many areas to cover costs. (DTN/Progressive Farmer photo by Victoria G. Myers)

A lot of cow-calf producers are leaving fall calf sales disappointed, often seeing a 20- to 25-cent dip in their take-home, compared to last year's prices. Part of the drop is seasonal, but drought conditions have made it more challenging to wean, precondition or background, putting a lot of 4- and 5-weights in the market, says Kenny Burdine.

The University of Kentucky Extension livestock marketing specialist, notes while many cow-calf operators will cover their cash costs and breeding stock depreciation on this year's market, they won't likely see a return on land, capital and management costs. A drought that started at the end of July and lasted until well into October across much of the Southeast, left many producers truck-weaning calves to save feed.

"Hay in much of the Southeast is in short supply," says Burdine. "Producers who need to source and buy hay are going to have to pay more for it this winter. In many areas they've already started feeding hay to get them through the drought."

Those producers with resources to precondition or even background calves, were often able to add value.

"There is definitely a potential to add value this way," says Burdine. "But that is an operation by operation decision."

The USDA's mid-October report reflected a positive trend on heavier feeder steers (750-800 pounds), showing an average price at $147.26/cwt, October 7, 2019, at the Oklahoma City National stockyards. That price was $6 above prices the week before the August fire at Tyson's beef plant in Holcomb, Kansas. It is a $12 recovery from the September 9, 2019, low of $134.80/cwt.

Fed cattle prices have also turned up, based on the USDA report. Market prices for fed steers for the 5-area marketing region increased to $107.34/cwt the week ending October 4th; a 7% increase since September 15, 2019.

Whether that momentum can continue, reaching back to cow-calf producers selling into that 4- and 5-weight category, will depend on a number of factors, one being the 2020 outlook for exports. The USDA is projecting positive news in that area. The U.S. beef forecast for first quarter (2020) has been revised up from 725 million pounds, to 765 million pounds. For second quarter, it went from 825 to 830 million pounds; and for fourth quarter, it went up from 845 to 865 million pounds. Third quarter forecasts called for a dip, from 850 to 845 million pounds.

Burdine says he's cautiously optimistic the export market will be a bright spot moving into next year.

"Given all that is going on, I think the export market has held up reasonably well," he says. "African Swine Fever in China continues to make an impact, and due to protein shortages there we've seen both pork and beef exports higher. It makes a lot of sense that we'll see that momentum continue into 2020."

(VM/AG)

Victoria Myers