Calf Price Seasonal Patterns

The fundamentals of cattle markets in 2019 do not currently send a clear higher or lower signal for calf prices this year. Larger supplies but great beef demand have kept calf prices in a pretty close range the past two years. That is still the story in early 2019. An unexpected shift could happen; but droughts, changes in the overall economy, etc., are nearly impossible to predict far into the future with any level of accuracy. But in years where there is not a fundamental push (an example would be the low-supply-driven surge in prices in 2014-2015), market seasonality is often the biggest driver of price changes throughout the year.

Calf prices are dependent upon prices around the country. Feedlot demand for steers and stocker demand for steers are both important drivers of the feeder markets. Also important is the timing of when most cattle are weaned and hit the market – usually during the fall months.  If these factors cause prices to behave similarly throughout each year, a seasonal price index can be used to estimate the impact that the time of year can have on cattle prices.

To examine this, we can calculate a seasonal price index that shows how much monthly average prices differ from annual average prices. This is calculated by dividing each month’s average price by the average annual price. Next, the monthly average across the years of data is calculated to obtain an average price index. The price index calculated in this article has a base value of 1. This implies that if a given months price index is 1, the average price in that month is equal to the average annual price. If a monthly index value is 1.05, then the average price in that month is five percent higher than the annual average.

Mississippi steer prices over the past 7 years in Mississippi have followed a seasonal pattern of higher prices in the early Spring months and lower prices in the early Fall. We are approaching the seasonally high months of the year for Mississippi and Southeastern calves. The seasonal lows for 500-800 pound steers usually come in the Fall when the largest number of calves are being sold. For 500-600 pound calves, prices in October are nearly 10 percent lower than the annual average – and about 15 percent lower than March prices, on average. These seasonal patterns are worth watching this year. How high the peak is in the Spring is another piece of information to use when projecting calf prices during the Fall.

Bred Cow Values Lower in 2018

The following commentary is a mix of my own commentary and that from the Livestock Marketing Information Center. 

Bred cow prices at auctions during the last quarter of 2018 were down 10-20% from a year earlier in key cattle production regions. USDA’s Agricultural Marketing Service (AMS) reported average prices in Georgia auctions for 1200-1300# cows bred 4-6 months earlier at $912.30 per head in December versus an average price in December 2017 of $1119.89, a 19% decline. The same comparison in Montana for mid-aged 1200-1300# bred cows showed a 6% price decline in December compared to a year earlier. Not surprisingly, Midwest auction cow price changes from late 2017 to late 2018 posted a drop between that of Montana and Georgia, as Saint Joseph, Missouri prices were down 15%. Female prices in Mississippi have been following a similar trend as shown in the chart above.

Interest in purchasing breeding stock has been cautious relative to current spot and futures market pricing for calves and yearlings. Steer calf prices in Oklahoma City during December were only 4% lower than a year ago. Feeder cattle futures prices for delivery in November 2019 were 2% higher in December than one year earlier. In mid-January, the November feeder cattle contract closed at $149.85 per cwt .versus $144.93 a year earlier. The LMIC is projecting Southern Plains steer calf prices (500-to 600-pound steer) in 2019 to average $167-$174 per cwt., which compares to the 2018 calf price average of $171.39. The forecast for yearlings (700-to 800-pound steer) is $145-$150 per cwt., providing a reference point for current futures market values. The yearling price for 2018 was $150.

Average annual (2018) bred cow (or replacement cow, per the St. Joseph, MO auction market quote) prices reported by AMS dropped to the lowest levels in five years. In some markets, prices declined back to averages last seen in 2010. St. Joseph, MO is the case in point, where drought last summer in northern Missouri led to some forced liquidation of herds. At the time of those lower bred cow prices (2012-2013), the beef cow herd was shrinking at a 2%-3% annual rate and the number of beef heifers being retained for breeding purposes was 20% lower than in 2018.

Purchasing a bred cow or any type of female is usually an investment in the future with the goal of earning revenue from her calves. The current lower bred cow and pair prices imply it will not require exceptionally strong feeder calf prices over the next few years for many of those cows to be profitable investments.

Missing Reports

This week’s article (below) comes from Dr. Brenda Boetel at the University of Wisconsin-River Falls. I have lightly edited it to add more information. I found it to be an interesting example of the value of information. In the senior-level Commodity Futures Marketing course I teach at MSU, we spend a few weeks discussing how markets work and what it takes to ensure they are efficient. One necessary ingredient is information. All of the good things that come from competitive markets rely on a substantial amount of readily and commonly available information. Long periods without information is more likely to lead to more volatile markets. 

Last week appeared to bring no movement toward a resolution regarding the partial government shutdown. As such, several reports were not available, including the World Agriculture Supply and Demand Estimates (WASDE), Quarterly Grain Stocks, and weekly export sales. Next week will see the absence of the Livestock Slaughter and Cattle on Feed report, and if this shutdown goes into February, the January Cattle (Inventory) report will be affected.

The markets will continue to make assumptions about the content of these missing reports. The longer the lack of information prevails, the greater the market correction may be when the reports resume, especially if the reports say something different than the market assumed. The cattle markets care about last week’s missing reports because they gave the final information on the size of the 2018 corn harvest, the speed in which corn is being used, and the first hint of information regarding how many acres of each crop will be planted in 2019. The market is trading on old-information, a less-than-desirable situation.

The WASDE report likely would have shown a decrease in 2018 corn yield. Additionally, poor harvest conditions affected acreage as well as yield. The USDA would likely have lowered 2018 corn production from 14.626 billion bushels to around 14.545 billion bushels. The February report will begin to adjust the demand side of the equation and examine more closely whether usage estimates for ethanol or exports needs to be adjusted.

Corn demand appears to be strong, with exports appearing to be greater than USDA expectations and feed and residual usage likely up. Ethanol production has been low, but strength in other usage likely makes up for the lower ethanol production. The overall impact of these demand factors would likely have USDA keep usage constant in February.

As the year progresses, we will need information on acreage intentions to get a glimpse into long-term corn prices, but for now, expect corn price to continue to behave seasonally and increase until mid-April/early-May.


Cattle Auction Receipts

Approximately 323,000 head of cattle ran through Mississippi auctions in 2018 according to data from the Mississippi Department of Agriculture and Commerce and the USDA Agricultural Marketing Service. This was down about four percent from 2017 but about four percent higher than the 2012 to 2016 average. Sales in the early months of 2018 were lower than during the same months of 2017 as shown in the graph. This was likely impacted by the low calf prices in late 2016 which led many producers to hold their calves until prices recovered.

While these numbers are for all cattle, the data also allow for a little more detailed look at specific classes. More than half of the cattle were steers with a 2018 total of about 185,000 head. That was down about six percent from 2017 – but again remember that 2017 likely included more carryover calves from 2016. On average, about 57 percent of the cattle sold at auctions for a given week were steers. Most cattle sold were calves with 65 percent of receipts being for cattle weighing less than 600 pounds.

Cows accounted for about 12 percent of auction sales in 2018 with total sales at approximately 38,000. This number includes only cull cows. The 2018 total is about the same as in 2017, but it is interesting to note that 2018 cow sales were 13 percent greater than the 2012-2016 average.

August, September, and October are the primary selling months in Mississippi and around the U.S. October saw the most volume in Mississippi in 2018 with 43,000 head sold. February and March are usually the slower months of the year. That is likely to be the case in 2019 since there was not a lot of price pressure in the Fall to encourage producers to hold calves until the spring.

Beef Cattle Market: Year in Review and a Look Ahead. Pt. 2: Demand

Happy New Year! This week’s article is part two of a two-part Supply and Demand series that began before Christmas. You can find Part 1 by clicking HERE

Domestic Beef Demand
While the larger supplies discussed in Part 1 will remain the biggest headwind to stronger prices in 2019, strong domestic and international demand for U.S. beef is continuing to provide price support. A strong domestic economy is supporting beef demand despite the larger supplies of beef and also larger supplies of other proteins chicken and pork. Domestic beef consumption per person in 2018 was about 57 pounds and is forecasted to grow another half-pound in 2019. This increased consumption occurred at similar to higher beef prices than a year ago. U.S. restaurant performance was also strong in 2018 with indicators suggesting an expanding restaurant industry most of the year.

International Beef Demand
While domestic demand can be classified as strong, international demand for U.S. beef has been superb. Internationally, robust exports have supported the demand profile for beef and, therefore, cattle. Beef exports have risen by over 20 percent over the past 2 years which has helped absorb some of the beef production increases. This includes an estimated 11 percent increase in 2018. Japan remains our largest export partner, but exports to South Korea have increased rapidly to claim the 2nd spot. Beef exports to South Korea are up 40 percent year-over-year based on the latest trade data. Overall, more modest export growth is forecasted for 2019, but it is worth noting that the modest forecasts the past two years have been sharply exceeded.

Beef demand has been and continues to be excellent which is providing some cattle price strength despite larger supplies. The past few years have been a demand-driven environment where stronger-than-expected beef demand has led to stronger-than-expected calf and yearling prices. The past few years have been important transition years that coped with the sharp supply increases. The slower herd growth numbers begin to paint a brighter price picture for 2019 and 2020 if domestic demand and exports continue to grow.

Beef Cattle Market: Year in Review and a Look Ahead. Pt. 1: Supply

Large supplies, record exports, and trade concerns are just a few of the topics that have dominated the headlines in 2018. Amidst all of these factors, calf prices have shown relatively consistent strength throughout the year. 2019 will likely bring a flat year in national herd growth which will position the industry at a pivotal point for supplies and prices moving forward.

Cattle and Calf Supplies
Cattle and beef supplies have been growing since the price peak in 2014-2015 and this continues to be the primary headwind to higher prices. The 2018 U.S. calf crop will be about 8.5% larger than it was in 2014 – that is nearly 3 million more calves on the ground. However, that growth has been slowing recently with 2019 expected to be close to flat for cow herd growth. It takes time for the expansion that has already occurred to work through the cattle and beef supply chain. The stage is already set for modestly larger calf and beef supplies in 2019. We can look to 2014-2015 as a mirrored example. 2014 was the low point for most of the cattle supply numbers (number of cows, calf crop, etc.), but 2015 was the lowest year of beef production.

Beef Production and Supplies
Beef production has increased by over 13 percent since 2015. Combined with a modest increase expected in 2019 and that would be an approximately 15 percent increase in beef production in just four years. This would be the fastest four-year growth since 1973-1977. Following the cattle supplies, the beef production increases are slowing. Looking into 2019, the current forecast is for a 1.9% increase in beef production in 2019. This would be the first increase of less than 2 percent since 2015.

Cattle Cycle
With respect to the cattle cycle, recent cowherd trends suggest 2019-2020 could potentially mark the end of the current U.S. cattle inventory build-up. It is worth noting that this is looking like a unique cattle cycle. History might suggest that after herd growth stops, herd declines will follow. But the ingredients for herd declines are not obvious at this point. While calf prices are no longer at the “rapid-expansion” levels, they have remained at or above profitable levels except for a period during late 2016. There is also no evidence to suggest drastically lower prices in the near future. This does not provide much incentive for herd declines in the near future. 2019 could be the first of a few relatively flat inventory years.

Cull Cow Market Struggles to Find a Bottom


This week’s article comes from Dr. Derrell Peel at Oklahoma State University. I wrote about the cull cow market a few weeks ago (available here) and I found Dr. Peel’s comments today to be valuable info to add to the ongoing narrative on cull cow markets. Above is a seasonal index for cull cow prices. The way to interpret this chart is that an index of 1.00 is equal to the annual average. Since the December index is 0.90, that implies that December cull cow prices are usually 10 percent lower than the annual average. In 2018, we have seen low prices in the May-August time period which goes against the seasonal norm. Dr. Peel discusses this more below. 

The cull cow market likely reached a seasonal low in November but it has been difficult to understand this market this year.  Prices for Breaker cows in Oklahoma City averaged $50.13/cwt. in November, nearly 11 percent lower year over year, while Boning cows averaged $47.88/cwt., over 16 percent down from one year ago.  Cull cow prices have been counter-seasonally lower year over year from May through October and have averaged 13-15 percent lower year over year for the last seven months.

Cull cow prices typically begin a slight recovery in December following the November seasonal low.  Cull prices average a much stronger seasonal increase after January 1, increasing by 6.7 percent in January from the November low; with February up 16.2 percent; March up 18.75 percent; April up 19.6 percent and May up 21.1 percent all from the November low.   From current levels, this would suggest breaking cow prices of $53.47/cwt. in January; $58.26/cwt in February; $59.53/cwt. in March; $59.94 by April and $60.85/cwt. by May.

The question is whether the normal seasonal price increase can be expected given how weak the cull cow market has been since May of this year.  One of the big factors contributing to weak cull cow prices has been weak cow boxed beef prices in the second half of 2018.  In the last week of November, cow boxed beef prices were 7.8 percent lower than year earlier levels and have averaged 8.3 percent lower year over year since mid-year.

Increased supplies of cow beef is no doubt part of the cause for lower cow beef (and cull cow) prices. Total cow slaughter is projected to be up 7.2 percent in 2018 over last year, with a projected 9.6 percent year over year increase in beef cow slaughter and 4.9 percent increase in dairy cow slaughter.  This is higher than the 2017 year over year increase of 6.3 percent in total cow slaughter.   Total cow slaughter in 2019 is forecast to be flat to slightly lower year over year and should reduce the supply pressure a bit following three years of increasing cow slaughter.  Beef imports, the bulk of which are processing beef that compete with cow beef, have been flat in 2018 and are forecast to decrease 3-5 percent in 2019.

While overall beef demand has been strong in 2018, the demand for cow beef is more uncertain. The bulk of cow beef is used for ground beef.  It is possible that ground beef demand is facing more pressure from large supplies of pork and poultry compared to beef middle meats.  Cow beef (90 percent lean) is mostly used to mix with fed trimmings (50 percent lean) to make the appropriate ratio of lean to fat in ground beef.  Fed trimmings prices have remained close to year ago levels in contrast to the weakness in cow beef prices.  Increased fed slaughter in 2018 and forecast larger slaughter again in 2019 would seem to suggest ample fed trimmings supply to support cow beef prices.  However, growing exports of some fed products, such as navels, that historically were part of fed trimmings may be the reason for stronger fed trimmings prices relative to cow beef prices.

With all that said, I expect that a relative tightening of cow beef supplies will help cull cow prices to follow close to a normal seasonal increase going into 2019. Like all beef markets it is dynamic and evolving and bears watching in the coming months.

Low Cull Cow Prices and Complex Culling Decisions

Cattle markets overall have shown impressive strength despite larger supplies during 2018. Feeder steer market averages have been near level or slightly stronger than 2017 levels in many markets over the past few months even in the face of larger calf supplies. USDA-AMS reported national feeder and stocker receipts were around 15 percent higher during August-October 2018 as compared to the same three months during 2017. Moving more calves at level or higher prices is a testament to the current demand-driven environment.

But the same “strength despite supplies” story does not hold for the cull cow market in 2018. Usually one of the more predictable seasonal markets, cull cow sellers have been plagued by low and going-lower prices for most of the year. Cull cow price data is a little more difficult to disentangle because there is often not as much volume or consistency across markets as there is for feeder cattle – but the trend has certainly been lower cull prices in 2018.  In Mississippi, average cull cow prices reported were about 16 percent lower over July-October 2018 compared to the same four months of last year. Similar declines are true for the rest of the country, too. South Dakota, average cull cow prices were about 12 percent lower over July-October 2018 compared to the same four months of last year. In San Angelo, TX, cull cow prices were 18 percent lower over this same period and in Kentucky, cull cow prices averaged about 17 percent lower

Larger supplies are indeed a big factor. Beef cow slaughter has been running above year-ago levels for nearly all of 2018. USDA-AMS reports about a 12 percent increase in the number of cull cows and bulls sold since the beginning of July 2018 when compared to the same period last year. Some of this is due to a larger U.S. cow herd leading to there simply being more potential culls. Low margins for dairy producers forcing more dairy cows into the slaughter mix is another factor.

While prices have been low already, we are now in the time of year when we typically expect lower cull prices. Cow slaughter is seasonally higher during the last three months of the year as producers make cull decisions prior to winter. Combined with winter usually being a slower ground beef demand time of the year, there usually is not much cull market strength until we get closer to Spring.

This dynamic makes cull decisions a little more complex this year for many producers. Wintering a cow that you do not plan to keep is generally something producers are not keen to do. But that may not be the case in certain instances this year – especially for producers who have been waiting for a cull price rally to sell over the past few months without reward. Culling, even at current prices, will still make sense for many (probably even most) producers once the cost of carrying a cow through the winter is considered. But for producers with relatively low marginal wintering costs, this is at least a year to crunch the numbers.


Strong Summer Meat Demand

Now that summer is fully behind us, we can get a picture of how strong meat demand was during this time. In short, it was a good quarter for the U.S. economy in general and also for beef and other meat demand. Consumer confidence continued to grow during this time and that boosts consumer spending. The following is a mix of my commentary and that of my colleagues at the Livestock Marketing Information Center.

The net value of goods and service produced by the U.S. economy during the summer quarter (July, August, September) increased at a 3.5% annual rate. That followed a solid Spring quarter, which was up 4.2%. Sustained U.S. economic growth rate over the last six months was the strongest since 2014. Consumers played a pivotal role in that growth by upping spending at a 3.8% to 4.0% rate. Consumer spending choices during the last six months reflected a preference for bigger-ticket discretionary purchases such as autos, furniture, and recreational goods. The latter category registered  9.4% and 12.4% quarter-to-quarter gains in the last two quarters. But it was also a good quarter for food and specifically beef purchases.

The spending category labeled “food and beverages purchased for off-premises consumption” (mostly grocery store purchases) was up 2.8% and 4.0% for the Spring and Summer quarters, respectively. Those increases fall into the middle range of growth for this sector during the last two years. Meanwhile, the spending category “food services and accommodations” jumped 8.1% and 6.9% during the Spring and Summer quarters, capturing the preference for away-from-home (restaurants) meals.

Wholesale market measures of beef demand were consistent with trends in consumer spending choices. Beef has more exposure to foodservice marketing channels than pork. The Choice beef cutout this summer was up 3% from a year ago, even as beef supplies from steers and heifers increased by 0.5%. More product sold at a higher price is the essence of favorable demand. Impressive export growth also played a role in this situation. By comparison, pork production was up 1.2% from a year earlier during the Summer, and hog carcass values were down 17% from the previous year. Lack of foodservice efforts to promote bacon was a noticeable difference this year compared to last year. Market conditions for chicken suggest problems. Breast meat values in wholesale marketing channels were down 23% from a year ago during the Summer with production only up 3.5%.

In total, beef demand was strong during the Spring and Summer of 2018 and this helped support prices in spite of larger supplies. Beef demand was bolstered by strong grocery store spending and strong restaurant spending.

2019 Forage Insurance Deadline Approaching

The deadline for a relatively new (for Mississippi) subsidized forage insurance program is November 15th for the 2019 year. Forage production is a primary source of grazing and hay for livestock producers and forage production is highly dependent on rainfall. The uncertainty of rainfall amount and timing is a risk all forage producers face. To address this risk, producers can use strategies such as forage diversification, improved soil fertility, and strategic grazing management. In addition to these strategies, there is a relatively new insurance product that aims to help forage producers manage rainfall risk.

The Pasture, Rangeland, and Forage (PRF) insurance program provides subsidized insurance protection for perennial forages produced for grazing or harvested for hay in the U.S. The program is administered by the United States Department of Agriculture (USDA) Risk Management Agency (RMA). Payments are triggered only by low precipitation during a specified period of time relative to a chosen coverage level. The program is designed to provide producers the ability to offset replacement feed costs when low precipitation causes reduced forage production. While this program has value to livestock producers who depend on forage production, it is important to note that PRF insurance is not directly linked to actual forage yields or livestock performance.

Research has shown that on average, over time, the benefit of this program is likely to outweigh the costs to the producer. A big reason for that is the 51% to 59% subsidy level. PRF has only been available in Mississippi since 2016. And as shown in the figure above, participation was fairly small in 2017. If you have any questions about it, below are some links for more information or feel free to reach out to me at You can also view a more detailed publication I wrote on this program by clicking here

Links of Interest 
Pasture, Rangeland, and Forage Home Page

Estimated Premium and Historical Performance Tool

USDA-RMA Agent Locator Tool