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USDA ’ s semiannual Cattle report estimated beef cows July 1 to be 31.4 million head , which was 650,000 head fewer ( -2.03 %) than the same time a year earlier .
Beef heifers retained for replacement of 4.3 million head was 100,000 head fewer ( -2.27 %) than the previous year .
The calculated number of calves outside feedlots July 1 of 36.1 million head was 600,000 head fewer ( -1.63 %) than the same time last year .
Total cattle and calves , including dairy , was 100.9 million head , which was 1.3 million head fewer ( -1.27 %) than the previous year .
“ While fed cattle slaughter nearly equals 2019 highs at 26.5 million head this year , we expect a 500,000-head decline in 2022 ,” Good says . “ This , combined with plans for new packing plants and expansions , possibly adding near 25,000 head per week of slaughter capacity over the next few years , should restore leverage back to the producer .”
In the meantime , Randy Blach , CattleFax CEO pointed out burdensome front-end fed cattle supplies continue to dog the markets . He explained front-end supplies — cattle on feed more than 150 days — were less than a million head as recently as 2016 . They were 3 million head last summer at the peak , fueled by pandemic-induced supply chain disruptions .
Positive Stocker Prospects
“ Cash feeder cattle markets continue to adjust to higher feed costs , partly in terms of general price levels but particularly in the relative prices of lightweight and heavy feeder cattle ,” said Derrell Peel , Extension livestock marketing specialist at Oklahoma State University , in mid-August market comments . “ The flattening of the price line across weights translates into higher value of gain potential for added feeder cattle weight gain .”
Although production costs are unknown at this time , especially the cost of wheat pasture , Peel said early budgets suggest decent return potential for fall stocker programs .
Using prices in his state at the time , Peel explained the price of 450 lb . steers ( Med . and Lg . # 1 ) averaged $ 186.08 / cwt . during the previous four weeks , while 750 lb . steers averaged $ 156.31 . That added up to $ 1.12 / lb . for 300 lb . of gain .
“ Values of stocker gain are higher this year and reflect the increased feedlot cost of gain due to high feed grain prices ,” Peel said . “ Stocker value of gain is expected to remain elevated in the coming months . The value of gain reflects the broad market environment for adding weight to feeder cattle . Actual profitability will , of course , depend on actual purchase and sale prices and production costs for stockers .”
Further , Peel pointed to March Feeder Cattle futures that were in the $ 166- $ 167 range . For Oklahoma producers , where basis is about $ 2 for 750 lb . steers , the estimated average March price was $ 168- $ 169 .
“ Another question for stocker producers is the expected purchase price of stocker calves later in the fall . The price of 450-500 lb . steers typically decreases seasonally from summer to an October low , dropping about 4.5 % from August to October . This suggests a price of roughly $ 177 / cwt ., for 450 lb . steers in October ,” Peel said . “ However , cattle markets are trending higher and may offset the seasonal price patterns . Current October feeder futures plus average
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basis for calves suggests a price for 450 lb . steers of roughly $ 196 / cwt . I suspect the most likely calf price for October will be between these values , perhaps in the range from $ 180- $ 190 / cwt .”
Peel pointed out multiple factors — including the size and timing of fall calf marketings — will determine actual calf prices .
“ Good pasture conditions could result in some delay in calf weaning and marketing this fall ,” Peel explained . “ Stocker prices will also be affected by the development , availability and supply of wheat pasture .”
Feed Costs Remain Elevated
Weather the remainder of this year and Chinese demand will continue to bolster domestic feed grain prices , according to Mike Murphy , CattleFax vice president of research and risk management services .
“ As China rebuilds its pork industry following their battle with African Swine Fever , they are looking for higher quality feed ingredients , such as corn and soybeans ,” Murphy explained . “ Exceptional demand from China is leading U . S . corn exports to a new record in the current market year , and strong demand for U . S . soybeans has elevated prices in the last 12 months .”
CattleFax expects spot soybeans prices to be $ 13 to $ 16 / bu . for the next 18 months . They forecast Corn futures at $ 4.75 to $ 6.25 during the same period .
As for weather , long-time CattleFax meteorologist , Art Douglas , professor emeritus at Creighton University , forecast La Niña conditions to return this fall , which would intensify drought in the West and Plains into early 2022 . He added that the precipitation outlook for fall through early next year suggests drought increasing in the Pacific Northwest with above-normal precipitation across the inter-mountain West – leaving the Midwest drier . He expects less tropical storm activity to reduce Southeast rainfall into late fall .
Drier weather in the Northern Plains and West will pressure hay production and quality in the 2021 season – supporting prices into the next year , according to Murphy .
“ May 1 on-farm hay stocks were down 12 % from the previous year , at 18 million tons ,” Murphy explained . “ The USDA estimates hay acres are down 700,000 from last year at 51.5 million acres . So , expect currentyear hay prices to average near $ 170 / ton ; 2022 average prices should be steady to $ 10 higher due to tighter supplies and stronger demand .”
Beef Demand Remains Strong Aftershocks from the pandemic continue to keep domestic demand at elevated levels not seen since 1988 , say CattleFax analysts .
“ Customer traffic remained strong at restaurants and retail – even as those segments pushed on the higher costs , proving consumers are willing to pay more for beef ,” Good explained . He noted the boxed beef cutout price peaked at $ 336 / cwt . in June , while retail beef prices pushed to an annual high at $ 7.11 / lb . Retail beef prices are expected to average $ 6.80 / lb . in 2021 and increase to $ 6.85 / lb . in 2022 .
At the same time , global U . S . beef export demand is on a record pace this year .
“ Tightening global protein supplies will support stronger U . S . red meat exports in 2022 ,” according to Good . “ U . S . beef exports are expected to grow 15 % in 2021 and another 5 % in 2022 .”
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