Higher Calf And Cull Cow Prices Expected In Coming Years by Mario Villarino

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As I was walking with thru a local retailer in Sulphur Springs, I joined an beef producers retired dairy producer started talking about agricultural economics. After few minutes our conversation transformed into a  concerned futuristic discussion of marketing of commodities. According to the October 19, 2019 marketing report (Texas A&M Extension- Ag Economics), the markets in 2019 have been a challenge for U.S. cow-calf producers. Mother Nature has impacted producers far and wide with blizzards at calving, flooding, and drought. Calf prices were pressured during the late Spring and early Summer months by surging corn prices. Recently, year-over-year corn prices have moderated significantly, but Omaha corn is still at $3.92 per bushel (18%) above a year ago.

The negative cattle market impacts of the Kansas beef packing plant fire also have spilled-over to the feeder cattle and calf prices. Low cull cow prices have added to the financial struggles. Overall, this year’s estimated cow-calf returns over cash costs plus pasture rent for the Southern Plains is projected to be negative and the worst since 1996 (unadjusted for inflation). Three out of the last four years have been in the red.

Since the mid-1970’s, the Livestock Marketing Information Center (LMIC) has estimated annual cow-calf returns based on a typical commercial full-time spring calving and fall weaning operation. The estimates are not survey-based and are developed for market analysis purposes. They do not represent an individual ranch/farm resource base. LMIC calculations only include cash costs of production and pasture rent. Importantly, owner management, labor, etc., are not included. The returns are useful only in a general context. The LMIC uses those estimates because producer return is a key factor influencing national herd growth/contraction. In the Southern Plains, using auction prices reported by USDA’s Agricultural Marketing Service (Market News Division) through mid-October, the LMIC projected that steer calves sold in the August-November time-frame would average 5.5% to 6.0% below 2018’s (down nearly $9.00 per cwt. for a 600-pound steer). That will be the lowest since 2016. So far this year, cull cow prices averaged over $10.00 per cwt. below 2018’s and for the full year are expected to be the lowest since 2009. This year’s production costs per cow were a bit below 2018’s due to reduced feedstuff usage. Still for 2019, LMIC projects that Southern Plains cash costs plus pasture rent exceeded $850 per cow. The drivers of cow-calf profitability may be turning more favorable in the next two years. LMIC forecasts that production costs may decline some in 2020, mostly due to lower interest cost on a per cow basis. And revenue should improve if higher calf and cull cow prices materialize, as expected. Producers should be planning for cyclically higher returns in 2020 and 2021. Currently, the LMIC is forecasting typical returns over cash costs plus pasture rent (basis the Southern Plains) to be positive by $70.00 to $85.00 per cow. For more information on this or any other agricultural topic please contact the Hopkins County Extension Office at 903-885-3443 or email me at m-villarino@tamu.edu.

 

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