Cow and Heifer Prices

First-Quarter Cattle Market Expected to Stay Strong

Victoria G Myers
By  Victoria G. Myers , Progressive Farmer Senior Editor
Consider cull prices and annual net income when making decisions about how much to pay for female replacements. (Progressive Farmer photo by Victoria G. Myers)

The national average price for a bred heifer may be under $2,000, but there are still cattlemen willing to pay more than $3,000 for the right replacement. Increasingly, the bred heifer market is about return, with many convinced higher quality is an investment that pays off.

Bred heifer prices are regionalized, even varying right down to the individual operation. But, they can be a strong market indicator. At the end of the day, what a cattleman is willing to pay for a bred female is telling. It's tied to long-term mindset and reflects everything from that producer's optimism to the economy, local forage conditions and weather outlook.

Some of the country's premier bred heifer auctions are part of the University of Missouri's Show-Me-Select (SMS) sales. The program's fall returns indicate a strong bred female market moving into spring.

SMS sales bring together consignors from across the state and report high, average and minimum prices on bred heifers. All heifers are bred to bulls with strict calving ease or birthweight EPDs, and have met standards for soundness and pelvic size.

Dave Patterson, University of Missouri beef reproduction specialist, says one of the strengths of SMS sales is the number of repeat buyers they bring together. Many come from other states, with Patterson noting SMS heifers are now in herds in 21 states.

Heifers At $3,200

An Angus-cross lot in the SMS Dec. 9, 2017, sale at F and T Livestock Market, in Palmyra, brought an impressive $3,200 per head. The heifers were from Keithley-Jackson Farm, of Frankford, Missouri. Ed Jackson has consigned at SMS for 21 years.

When asked what it was about those heifers that drew such interest, Patterson says they were Tier 1, artificially inseminated (AI) heifers with a lot of genetic information. Plus, there was a bidding war between repeat buyers.

"Both of those buyers had bought replacements from that sale in past years, and neither one was going to back down," Patterson says. "That is what we've seen across the state. Particular buyers with good success with specific consignments will pay what they need to get those heifers."

He adds they are now seeing consignors who built their herds on SMS females. "A first-time consignor in the Dec. 9 sale, Bryan Evans, of Vandalia, built his whole herd starting with SMS heifers. This was the first year he consigned, selling 15 head at an average of $2,140—beating the overall sale average of $2,118. That, to me, is exciting. He's a young producer, and he's been focused on building quality replacements. SMS is becoming a whole enterprise for some of these producers, because it's built on reputation."

Fall Average $1,937

Across all six SMS fall sales, the average price was $1,937. Breaking down the numbers, however, the overall trend was up slightly compared to 2016, where the average price was $1,803.

Highlighting some of the specifics

The Nov. 17 sale, at Joplin Regional Stockyards, showed top price for a lot at $2,200 per head, average at $1,867 per head. Both of these numbers exceeded the 2016 sale report, where prices were respectively $2,050 and $1,651.

There was also a Nov. 17 sale at Kirksville Livestock LLC. In this case, top price for a lot came in at $2,100 per head, average at $1,872. Both prices were below the 2016 numbers, $2,850 and $1,731.

On Nov. 25, a sale at Kingsville Livestock Auction exceeded and met year-earlier levels. Top price for a lot was $2,600 per head this year, the same as in 2016. Average price, however, was $1,968, slightly above 2016's $1,910.

On Dec. 2, a sale at Fruitland Livestock Sales showed a drop in top prices when compared to year-earlier levels—$2,500 for 2017 versus $3,200 for 2016. The average overall prices were higher this year—$2,010 per head versus $1,962 per head in 2016. This was similar to the Dec. 8 sale at Farmington Livestock Auction Inc., where again the top price showed a drop ($2,450 this year compared to $2,950 in 2016), but the average price improved ($1,790 compared to $1,518).

The last sale, Dec. 9, was held at Palmyra's F and T Livestock Market. Prices exceeded 2016 levels across the board. Top price for a lot on a per-head basis was that impressive $3,200 compared to $2,800 in 2016. Average price was $2,118 per head compared to $2,050.

Behind The Prices. One of the stronger areas for bred heifer prices, the Midwest went into the winter months with favorable forage conditions across much of the region. Lee Schulz, livestock economist with Iowa State University, says that is a definite positive but adds there are a number of other reasons the heifer market has held up so well.

"We've seen strength in feeder cattle prices overall, which means there is strong demand from feedlots, and that helps pull those female prices up," he notes.

Schulz says the fall rally on feeders, where prices got between $150 and $160 per cwt, left producers more profitable than they may have expected to be based on the beginning of 2017.

"Looking back to March 2017, projections were for lower calf prices and less profitability in the cow/calf sector," he continues. "Going back to August, a rally helped the economic situation look better. So, producers, I believe, are willing to make investments to hold herd numbers steady. That is pulling up replacement costs. And, there are even some producers looking at this as an opportunity for continued herd expansion."

Lastly, Schulz believes there is a seasonal element at work this year. Specifically, it is the return to a seasonal high for cull prices in the spring. While there have been some counterseasonal peaks on the cull side, such as 2014 and 2015, normally, cull cow prices are lowest in the fall and rise going into the new calendar year.

"Last spring's rally on the cull side gave added income to many cow/calf enterprises. That may have opened the door for demand for females," he says. "As we look at how 2017 ended, there is certainly the potential again for those peak cull cow prices to be in the spring."

Producers looking to cull on that seasonal peak positioned themselves with the purchase of replacements in the fall. Those replacements are spring-calvers, allowing herd numbers to stay level.

Using Superior's auction market as an indicator, Schulz points out nationally bred heifers in December were selling for $1,025 to $1,935 per head. Bred cows were $1,150 to $1,950. He notes there is quite a bit of disparity in bred heifer prices because of genetics of individual lots, but he believes this average is a good indicator of the market.

Schulz expects female prices to hold moving through the first quarter of 2018, and he's fairly optimistic about prices in the cattle sector in general.

"Seasonally, we'll see live cattle futures contracts higher in the spring," he explains. "The December-to-April live cattle futures spread was about $5 as the year ended. That pulls up all cattle values. I think 2018 has the potential to look a lot like the fourth quarter of 2017. That is optimistic because an additional 3.5% increase in slaughter is expected in 2018, in addition to the 5.2% year-over-year increase in 2017. What's key is demand. If that holds above supply, it will support a continuation of these prices."

The Price Line

Asked if producers may be paying too much for bred heifers now, Schulz admits that is the question of the day. He believes it's a difficult assessment to make, as this is a long-term investment, and no one knows what a producer is going to receive for calf prices for the next five, six, seven or more years.

"Also, no one knows what cull cow prices will be at the end of her useful life. Or, what the ultimate cost to keep her will be. Production and price risk matter, and the outlook becomes important," Schulz continues. "Go back to 2013 and 2014, when females were at record-high prices. Producers could pay those high prices because the outlook was for high prices. You could pencil out some of those investments based on the assumptions we had about the market.

"We're all weighing the expectation for calf and cull prices relative to what we're paying now. It's an investment, and the mechanics are very similar year to year. What's ultimately important is annual net income derived through the cow/calf enterprise. It will be different for everyone," Schulz says.

Missouri's Patterson, says at the end of the day, female quality can mean the difference between profit and loss.

"Right now we are seeing a difference of about $400 between our Tier 1 and Tier 2 bred heifers," he says. Those Tier 1 heifers are out of high accuracy AI sires, and producers pay a premium for that. They are about as risk-free a way to buy a replacement as there is."

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Victoria Myers