Latest News From Derrell Peel - Oklahoma State University

Ample supplies of fed cattle continue to hang over the market as feedlots struggle to get more current. Beef packers have very large margins and appear to be trying to push kills in the face of limited capacity. 

April's USDA Cattle on Feed report requires careful interpretation.  The typical year-to-year comparisons are mostly meaningless because of the pandemic disruptions affecting markets one year ago.

Drought is significantly worse now than at the same time last year with 63% of the country now in D0-D4 categories. Producers should inventory forage and hay reserves and carefully evaluate forage production potential.

Beef exports have evolved significantly in a very dynamic environment of global politics and trade policies; direct and indirect impacts of animal disease outbreaks; and growing beef preferences and consumption.

USDA-NASS released two reports last week that added more fuel to red-hot grain and oilseed markets.  The information about current and future corn markets has significant implications for cattle markets. 

Drought conditions loom as the grazing season begins across the Central Plains. The latest Drought Monitor shows 43% of the U.S. is experiencing some degree of drought, compared with just 24% last year at this time.

Fed cattle prices have not put together any sort of spring rally with cash markets trading in a narrow range for several weeks, but there is considerable optimism beginning in the second quarter of the year.

Cattlemen experienced a wide variety of weather across the Central Plains and mountain states last week, bringing much-needed moisture along with some unwelcome cold temperatures.

Feeder cattle markets have bounced back from the brutal February storm just in time for the termination of winter grazing of dual-purpose wheat.

U.S. beef exports are expected to increase modestly in 2021 to reach the second highest level behind the 2018 export record. A key to export growth includes continued growth in the China/Hong Kong market.

The feedlot situation in early 2021 is a carryover from the disruptions and unusual dynamics last year.  For the entire year in 2020, feedlot placements were down 4.0 percent. 

A massive and extended winter blast has engulfed the southern plains before spreading across much of the Delta. The storm impacts cattle producers who are struggling to provide water and feed access for cattle. 

The cattle on feed inventory on Jan. 1 (14.71 million head) is a record 57.3% of the feeder cattle supply.  This means there are less than two head of feeder cattle available outside feedlots for every animal on feed.

The inventory of all cattle and calves in the U.S. was 93.6 million head on January 1, 2021, down fractionally from 93.8 million head one year ago.

Drought persists across much of the west and has extended into much of the Great Plains, with several states showing the impact of the drought on hay production and supplies and the challenges for cattle producers.

The beef industry reacts to high feed prices differently than other species as the ruminant biology of cattle means less grain will be used by changing how cattle are produced more than by changing production levels.

U.S. beef trade is stabilizing as the ripple effects of the initial COVID-19 disruptions continue to fade.  The latest beef trade data for November shows that monthly exports were up 13.2 percent year-over-year. 

Numerous factors are in place that will shape cattle markets for at least the first few months of 2021. The COVID pandemic will continue to limit food service and restaurant demand for beef.

Volatility throughout 2020 creates a difficult challenge to assess the current cattle cycle and longer-term herd dynamics. Here's a glimpse of the data a month prior to USDA's annual inventory report.

Flow of cattle through feedlots should begin to show more consistent tightening in 2021. The beef cowherd was at a peak in January 2019 and led to a 2019 calf crop that was down 0.7 percent from the 2018 peak calf crop.

U.S. global meat protein exports have continued to evolve in 2020.  Some of the changes this year reflect ongoing trends in global meat markets but the COVID-19 pandemic has also affected protein trade.

Here are forecasts for production, imports, exports and per capita consumption of beef, pork and broiler meat in 2021.

Feedlot placement weight is related to fed cattle finished weight. For cattle in the typical range of placement weights, a one-pound increase in placement weight results in 0.5 pounds of additional finished weight.

Feeder markets are reflecting a mix of influences including seasonal supplies of calves, wheat pasture forage conditions, higher corn prices and volatility in futures markets.

Beef demand has remained remarkably strong since the beginning of the pandemic. Beef demand continues to be challenged with restricted food service, but retail grocery demand remains robust.

The early winter storm in late October brought timely and much-needed rain to much of Oklahoma and sharply reduced drought conditions. Feeder cattle prices jumped sharply from the low two weeks ago during the storm.

Last week’s early winter storm exposed cattle to cold, wet conditions, but also brought much-needed moisture to the nation’s wheat belt reviving prospects for winter grazing.

A large winter storm is advancing across the central U.S. bringing cold temperatures and some much-needed moisture. Feedlots continued to build inventory during September leading to a record inventory for Oct. 1.

The past 30 days have been the driest on record in parts of Oklahoma, adding to the seasonal price pressure on feeder cattle and cull cows.

There are many dynamics in cattle slaughter markets in the fourth quarter that will determine total slaughter for the year, but an early analysis suggests a 2.5% decline.

Wheat pasture development and growth is likely to slow or even reverse if forecast weather conditions are realized.  This, in turn, may reduce stocker cattle demand in the coming weeks.

The September Cattle on Feed report was largely a replay of the August report with larger than expected placements pushing feedlot inventories higher.

Weaned and preconditioned calves bring significant premiums over calves that were weaned on the truck on their way to the sale yard.

Continuing COVID-19 impacts, global recession, political tensions and exchange rates will all be important in determining global beef trade in the coming weeks and months.

With 41% of the nation in drought conditions, there is no doubt that lack of pasture is creating management challenges in the worst drought areas and likely leading to some regional destocking and relocation of cows.

Markets will no doubt evolve this fall and producers must continue to evaluate winter grazing potential under dynamic market conditions and profit potential may vary widely.

Friday's USDA cattle on feed report held a few surprises for cattlemen, and analysts are finding the available data a challenge after the turbulence witnessed the first half of 2020.

Preliminary GDP data suggest the U.S. experienced an unprecedented economic decline during the second quarter of 2020, leading to uncertainty about consumer beef demand for the remainder of the year.

USDA's release o Friday of Cattle on Feed and Cattle Inventory report data suggests backlog is decreasing in feedyards and beef cow numbers are tightening across cattle country.

Boxed beef prices have dropped to their lowest level since 2017, and beef production will continue at a pace above last year with carcass weights up 35 pounds year-over-year.

Trade data for May shows sharply lower beef exports, likely due to COVID-19 related disruptions in beef production and also in part due to decreased international beef demand.

There is much uncertainty about the future impacts of COVID-19 but even in the best of circumstances, the economic impacts are enormous, with some projections worse than the 2008 recession.

In anticipation of July 4, estimated beef production for the week ending June 27 was 562.3 million pounds, up 5.3 percent year over year. 

Retail grocery will transition from limited beef supplies in recent weeks to ample supplies at the same time food service demand is slowly building this fall.

Drought conditions have expanded rapidly in recent weeks and while many regions do not yet face imminent actions, it is not too early to develop drought plans for your ranch.

Barring a major setback, it appears that America's beef markets are moving past the worst of the COVID-19 disruptions that have caused upheaval in recent weeks.

The feedlot industry will spend much of the summer working through the backlog of fed cattle but the hole from March and April feedlot placements should provide a marketing window to catch up by this fall if not before.

Overall feed and forage will be favorable and provide more flexibility for feeder and feedlot cattle operations. Potentially emerging drought conditions are a threat and may reduce production and marketing flexibility.

The cattle industry sees a glimmer of hope in last week's harvest data, with estimated slaughter at 452,000 head, down 32.2 percent year-over-year, but up 6.4 percent from the prior week.

Consumers first saw beef supply disruptions in March when the shutdown of food service shifted demand to the retail grocery side where supply chain bottlenecks and a surge in demand resulted in temporary shortages.