Negotiated cash fed cattle trade ranged from a standstill to mostly inactive on very light demand through Monday afternoon, according to the Agricultural Marketing Service.
Prices last week were $142/cwt. on a live basis in Nebraska and the Southern Plains and $142-$144 in the western Corn Belt. Dressed prices were at $226.
The five-area average weighted direct fed steer price last week was $1.88 higher at $142.36/cwt. The average steer price in the beef was $2.00 higher at $226.04.
Equity and futures markets were closed Monday in observance of President’s Day.
As mentioned in the previous day’s Cattle Current, Live Cattle futures were an average of 75¢ higher (37¢ to $1.37 higher) week to week on Friday, except for 30¢ lower in near Apr.
Feeder Cattle futures closed an average of $1.24 higher (15¢ to $1.80 higher) week to week on Friday except for 80¢ lower in spot Mar.
Choice boxed beef cutout value was $1.76 lower Monday afternoon at $264.09/cwt. Select was 79¢ lower at $261.84.
******************************
As mentioned at the outset, equity markets were closed Monday, giving investors and traders an extra day to dwell on the inflation concerns and political tensions in eastern Europe that drove markets lower amid a volatile ride last week.
******************************
Drought will be an obvious key factor to whether the nation’s beef cow herd continues to contract this year and by how much.
“Widespread drought in 2022 could result in much more pronounced cow herd liquidation and relocation than previously and the scenario will be all about what we have to do,” explained Derrell Peel, extension livestock marketing specialist at Oklahoma State University, in his market comments last week, offering one drought scenario.
This week, Peel consider the outlook if drought subsides.
“The cyclical peak in the beef cow herd inventory was in 2019 and the industry has been in liquidation for three years, significantly enhanced by drought in 2021 and to a minor extent in 2020. If drought is not a limitation in 2022, will cattle producers continue herd liquidation? The answer will be determined by what cattle producers want to do and can do relative to cow culling and heifer retention,” Peel says. “Higher cattle prices and expectations of continued higher prices may have producers interested in slowing liquidation, holding cattle numbers steady or even expanding. However, the extent to which higher prices leads to expectations of higher profitability (and a desire to expand the herd) will be tempered by higher feed and other input costs.”
Peel points out, herd rebuilding will be the first step for producers emerging from drought.
“The overall beef cow culling rate in 2021 was 11.55%, the highest since 2011. In drought areas, producers who culled heavily last year may be able to sharply reduce culling this year if forage conditions improve,” Peel says. “In other areas, producers may hold cow culling to a minimum. After increasing sharply in 2021, beef cow slaughter could drop by as much as 10-15% year over year in 2022. This would result in a beef cow-culling rate between 10% and 10.5%. An even lower culling rate might be possible…the average culling rate in the last herd expansion from 2014-2018 was 8.7%…but it doesn’t seem likely that expansion signals are that strong yet.”
Moreover, Peel points to the 3.3% year-over-year reduction in beef replacement heifers Jan. 1, which limits herd expansion opportunities this year.
“It appears to me that the most aggressive 2022 scenario is for the industry to hold the beef cow herd to a low level of liquidation…perhaps a 0.5% or less reduction in beef cows,” Peel says. “Achieving herd expansion is likely not feasible and even holding the herd to zero change stretches the numbers to unlikely levels. If the industry does try to minimize herd liquidation in 2022 and prepare for later herd expansion, the reduction in cow and heifer slaughter could result in a larger decrease in beef production this year than is currently forecast.”
Peel expects the most likely reality this year lies in between severe-drought and no-drought scenarios, with continued drought in some regions.
“The result could be modest levels of additional beef cow herd liquidation in 2022, perhaps less severe than 2021 but still significant continued reduction in the beef cow inventory. It is likely that cattle numbers will continue to tighten in 2022,” Peel says.