March 30, 2020
Cattle market responses to recent market turmoil
By Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist
Economists often say that market prices are determined by demand and supply. What they really mean is more correctly stated as “market prices are determined by expectations of demand and supply”. Under more stable and normal circumstances, this distinction is not particularly significant. However, the current market situation creates significant disparities between the current supply and demand situation and expectations for coming supply and demand conditions. The result is a number of seeming paradoxes between different cash cattle and beef markets and between cash and futures markets.
Fed and feeder cattle markets have exhibited extreme volatility while balancing current market conditions and expectations for the future. As the Dow Jones fell from over 29,000 in the third week of February to less than 19,000 one month later, Live cattle futures fell from about $112/cwt. to $86/cwt. (June contract) over the same period. The markets reflect the ongoing concern about the weakening U.S. and global macroeconomic conditions resulting from COVID-19. June Live cattle futures recovered to $97/cwt. before dropping again late last week to $89/cwt. Live cattle futures have also reflected the risk that labor disruptions could disrupt packing plant operations.
Cash fed cattle prices declined from nearly $120/cwt. in mid-February to a low around $106/cwt. in mid-March. Cash fed prices declined on broader concerns reflected in the Live futures as well as the supply pressure of increased beef production. Year to date beef production is up 6.3 percent through mid-March. In the past two weeks, cash fed cattle prices rebounded to about $119/cwt. as packers increased beef production in response to the sharp demand increase for retail beef. Beef production is estimated to be up over 11 percent the last two weeks of March. Saturday cattle slaughter the past two weeks is estimated to be up 90 percent year over year and contribute to a 5.9 percent year over year increase in total cattle slaughter for the two-week period. Carcass weight continue well above year ago levels.
Feeder cattle futures markets also reflected the macroeconomic uncertainty and declined from over $143/cwt. in mid-February to a low of about $109/cwt. by mid-March (May contract). Feeder futures continues to exhibit tremendous volatility trying to balance the longer-term macroeconomic concerns with short-term market conditions.
Cash feeder cattle prices followed futures with the Oklahoma combined auction prices for 500-550 lb. No. 1 steer prices dropping from about $184/cwt. in the third week of February to a low near $152/cwt. one month later. Prices for 750-800 lb. No. 1 steers declined from about $139/cwt. to $117/cwt. over the same period. The sharp drop in cash prices resulted in a sharp drop in feeder cattle marketings. Combined auction totals for Oklahoma declined 59 percent year over year in the last three weeks of March. Nationally, total feeder and stocker receipts are down 56 percent in the last three weeks of March. The squeeze on available feeder supplies pushed feeder prices sharply higher last week by 10 to 12 percent over the previous week. Ripple effects will likely impact feeder cattle markets in the coming weeks.
The different patterns of boxed beef, fed and feeder cattle prices in the past six weeks illustrates vividly the fact that these markets operate with very distinct dynamics. These dynamics have become very apparent as the distinction between the current market situation and expectations for future supply and demand conditions has widened.
Bull management prior to the breeding season
Glenn Selk, Oklahoma State University Emeritus Extension Animal Scientist
Before the breeding season begins, a few simple management procedures involving the bulls can increase the likelihood of a high pregnancy percentage among the cows. Any rancher that purchases a young, highly fitted or conditioned bull should plan to gradually reduce the fleshiness of the bull before the breeding season. To let these bulls down, it is a good practice to start them on a ration that is not too dissimilar to the one to which they have been accustomed, but that the concentrate portion is 60 to 70 percent of their previous intake. The amount of grain can be reduced at the rate of about 10 percent per week until the desired level is achieved. At the same time, substitutions should be made in the form of quality forages–such as high quality grass hay or alfalfa hay. Ideally, this letdown should be completed prior to the time bulls are turned out.
Dramatic nutritional changes can have an adverse effect on semen production, so it is important that these ration modifications be done gradually. Producers need to try to keep the total diet of these young bulls at, or near, 12% crude protein. Therefore the forage needs to be excellent quality. Allow the change of diets to take place gradually, instead of allowing a rapid condition and weight loss during the first of the breeding season, which could be reflected in a reduced calf crop next year.
Other bull management strategies include the following:
the feet and have hoof trimming completed at least 30 days prior to the
start of the breeding season to avoid lame or sore-footed bulls at the
of the breeding season.
2) In multi-sire pastures, make certain that the bulls that will be pastured together have been in a common trap or pasture prior to the breeding season. Bulls WILL establish a social hierarchy. It is better to get this done before the breeding season begins rather than wait until they are first placed with the cows.
3) Put young bulls with young bulls and mature bulls with mature bulls. Mixing the ages will result in the mature bull dominating the younger bull completely, and in some instances causing a serious injury. If the plan is to rotate bulls during the breeding season, then use the mature bulls first, and follow with the yearling bulls in the last third of the breeding season. In this way, the young bulls will have fewer cows to settle, and will be 1 – 2 months older when they start breeding.