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Kentucky Beef Cattle Market Update-December

Dec 18, 2014

By Dr. Kenny Burdine, Livestock Marketing Specialist

As I write this in mid-December, feeder cattle markets have fallen significantly from one month ago. Corn prices have increased during this time, while fed cattle futures have softened. At the same time we have also moved to the time period when feeders are placed with the expectation of slaughter during the lower-priced summer months. This is also consistent with the fact that the market drop in Kentucky markets appears to have been much more pronounced on heavy feeders than on calves.

In October we discussed cow slaughter in some detail. Given the decrease that we have seen in cow slaughter from last year, I expect beef cow numbers to be slightly higher when USDA releases their beef cow inventory estimates next month, which would also mean a slightly larger calf crop. I feel like the increase will be about 0.5%. At the same time, we are likely to see some increased heifer retention, especially in the northern and southern plains. While changes in cow numbers due to decreased cow slaughter impact numbers quickly, it will take some time for heifer development to impact cow numbers. So, I think it is likely that 2015 is the first year that we see beef cow numbers increase, but I expect increases to continue for a few years if weather cooperates.

Looking ahead to 2015, the slightly larger calf crop will impact prices somewhat, but I think our primary threat will be from increased competition from competing meats. At the calf and feeder cattle level, I still expect the calf market to be stronger in the spring of 2015 than it was in the spring of 2014. However, I do expect that the 2015 fall market will be softer than the market that we enjoyed this fall. Backgrounders placing calves into winter programs need to carefully examine the margins being offered between current calf prices and spring feeder cattle futures, which has changed with the recent drop in futures. Given the market volatility that exists, producers should consider some form of price protection on calves that are placed this winter for sale in the spring.

Source:osu.edu