Beef Cattle Market Update Kenny Burdine UK Agricultural Economics Economics

Outline for Discussion Overall market factors Calf expectations Heavy feeder expectations Fed cattle expectations A bit on post-weaning programs

Where we’ve been… 2011-2013 Weather challenges, competition for pasture acres, cow herd gets younger 2014-2015 Cooperative weather, record cattle prices, expansion across all meats 2015-2017 Expanding cattle numbers, volatile export levels, growing pork and poultry supplies, rising slaughter weights Economics

Nearby CME© Feeder Futures (Jan 2008 - August 2017)

Data Source: USDA-NASS Economics Data Source: USDA-NASS Livestock Marketing Information Center Economics

Jan 2017 Cattle Inventory Economics

July 2017 Cattle Inventory Economics

Beef Heifers as % of Cow Inventory (January: 1973 to 2017)

Beef Heifers as % of Cow Inventory (July: 1973 to 2017)

BEEF COWS THAT CALVED JANUARY 1, 2017 (1000 Head) DC 1 3 5 7 8 11 14 43 74 110 120 170 184 185 207 210 220 225 288 290 338 370 387 448 465 476 497 500 546 643 655 693 714 805 908 909 914 954 965 1023 1486 1570 1664 1920 2052 2095 4460 0 to 170 170 to 448 448 to 914 914 to 4461 TX still down 465K cows from 2011 Economics Livestock Marketing Information Center Data Source: USDA-NASS

Beef Cows in Key States (2006 vs. 2017, 1,000 cows) % Change Texas 5,350 4,460 -17% Oklahoma 2,045 2,095 +2% Florida 916 908 -1% Georgia 592 497 -16% Tennessee 1,080 909 Kentucky 1,118 1,023 -9% US 32,702 31,210 -6% Economics Data Source: USDA-NASS Livestock Marketing Information Center

Economics Data Source: USDA-AMS & USDA-NASS Livestock Marketing Information Center Economics

Economics Data Source: USDA-AMS Livestock Marketing Information Center

Key Market Expectations 1% larger cow herd January 1, 2018 3% increase in beef production 3% increase in pork production 2% increase in poultry production Per caps are going up!

KY Auction Prices 550# Steers ($ per cwt)

Calf Market Expectations Spring board does not support current calf prices Runs likely late in some areas due to weather $15 per cwt off calf market by late October / early November – KY = $1.35 to $1.40 Back to or slightly above current levels by spring- KY = $1.50 to $1.60 2018 calf market will average between 2016 and 2017 levels

Estimated Fall Cow-calf Revenues 550# steer calves - $140 per cwt 550# heifer calves - $125 per cwt Average calf: 550# x $133 per cwt = $729 Weaning rate effect 90% - $656 per cow 80% - $583 per cow 70% - $510 per cow Economics

Cow-calf Thoughts on 17 / 18 2014 / 2015 calf prices supported some bad habits Access current profitability What are your costs? Avoid low market mentality Be aggressive culling Stocking rate and culling criteria should move with market Consider post-weaning programs Economics

KY Auction Prices 850# Steers ($ per cwt)

Heavy Feeder Expectations Decline seasonally through winter $5 to $10 per cwt Fall 2018 live board does not support anything above low $130’s KY = upper $130’s for 850# steer Price slides to widen by time calf runs hit, expect normal - $4-6 on heavies, $6-8 on calves

Economics Data Source: USDA-AMS Livestock Marketing Information Center

Data Source: USDA Livestock Marketing Information Center

Data Source: USDA Livestock Marketing Information Center

Data Source: USDA Livestock Marketing Information Center

Fed Market Expectations Is this the bottom? Some “glut” of cattle to work through late / fall early winter Continued issues with board vs. cash Feedlots are bidding on feeders like they don’t believe the spring board

Post-weaning Programs for 2017

Thoughts for 2017 Fed cattle market has bottomed late last two years 2017 looks very similar to 2016 Feeder cattle market tends to follow Market still shows separation for green vs. weaned calves Feed prices have moderated Much pasture availability Value of gain fairly attractive

What is the current value of gain? Source: KY Livestock and Grain Market Report for 9-11-17

What are additional lbs worth? 525# @ $151.31 = $794 625# @ $144.51 = $903 $109 for 100 lbs, or $1.09 725# @ $138.20 = $1002 $99 for $100 lbs, $0.99 per lb

Value-added in Current Market State Market Summary (last week)

60 Day Backgrounding (Drylot) Value 550# steers in at @ $1.50 1.25% BW 50 / 50 @ $160 per ton 1.25% hay @ $60 per ton 2.25 lbs gain per day 0.25 lb mineral per day @ $20 per bag $1.40 price for 685# steer

60 Day Drylot Budget (No price premium, owned calves)

60 Day Drylot Budget ($5 per cwt price premium, owned calves)

120 Day Backgrounding (Drylot) Value 550# steers at @ $1.50 1.25% BW 50 / 50 @ $160 per ton 1.25% BW hay @ $60 per ton 2.25 lbs gain per day 0.25 mineral per day @ $20 per bag $1.30 price for 820# steer

120 Day Drylot Budget (No price premium, owned calves)

Summary Over next couple years, calf market still has some downside Producers should focus on efficiency and adding value Heavy feeders and fed prices probably comparable to 2017 levels

Contact Information Kenny Burdine UK Agricultural Economics (859) 257-7273 kburdine@uky.edu Economics