Dec. 14, 2015
Here we are…where to from here?
by Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist
The contrast between the beginning and end of 2015 is stark. It has been a year of transition as the markets turned the corner from a long run of up-trending prices to the reality that growing cattle inventories and increasing beef production imply lower prices in the future. The idea that things will change is not a surprise but how that change will happen is most always impossible to predict. Cattle and beef market fundamentals have not changed nearly as dramatically as the recent volatility and freefalling prices would suggest; but the process of changing market psychology from bullish to bearish is emotional, often overly-dramatic and usually painful.
The second half of 2015 has been agonizing and frustrating for nearly everyone involved and the contrast between the annual averages and the end-of-year conditions are marked. Cattle prices at the end of the year are sharply lower, although 2015 will have the highest average annual prices ever. Beef production in 2015 will be down another 2-2.5 percent year over year, but production in the fourth quarter will be up an estimated 1.5-2.0 percent year over year. The annual comparisons of 2015 and 2016 will show sharp differences; with average cattle prices lower and beef production increasing year over year. However, most of the adjustments are already in place at the end of 2015 and current conditions provide the starting point for 2016.
Cattle and beef market fundamentals will continue to evolve as anticipated in 2016. Herd expansion will continue, perhaps more modestly than in 2015, and the larger 2016 calf crop will contribute to significantly higher feeder cattle supplies by the end of the year; with bigger implications for beef production in 2017. Carcass weights will continue higher, given continued cheap feed costs, but some of the incentive to overfeed cattle should be moderated with the realignment in feeder and fed cattle prices. 2016 beef production will increase year over year based on higher carcass weights and increased cattle slaughter. Feeder cattle supplies in 2016 will increase year over year but will be moderated by continued heifer retention and a likely moderation in feeder cattle imports from Mexico (already dropping in late 2015) and continued small imports of Canadian feeder cattle.
After jumping sharply higher in 2015, pork production is expected to increase only slightly in 2016 and, with improved pork exports, domestic pork consumption is likely to be slightly lower year over year in 2016. Broiler production will likely increase at a much slower pace in 2016 and, with export markets recovering from avian influenza restrictions, domestic broiler consumption is expected to be only slightly higher in 2016. Most of the projected increase in 2016 beef production will be offset by lower beef imports and stable, if not slightly higher beef exports; leading to only a small increase in domestic beef consumption. In total, 2016 red meat and poultry consumption is expected to be close to 2015 levels, perhaps up fractionally.
It was impossible to anticipate the psychological upheaval in the second half of 2015 and, though it seems likely that the worst is past, it is impossible to say for sure that it is finished. Nevertheless, given how much market adjustment has been done, in fact, likely overdone, here at the end of 2015, cattle prices are expected to recover some from the end of year levels and trade in more of a sideways range in 2016. Hopefully the emotional whirlwind is mostly behind us and the New Year will bring less volatility and provide more stability and a stronger reflection between markets, especially futures, and cattle market supply and demand fundamentals.
Dewormed calves get head start in the feedlot
by Glenn Selk, Oklahoma State University Emeritus Extension animal scientist
Cow-calf producers that are considering retained ownership of the calves through the feedlot may wish to consider deworming the calves before shipping. Research at Iowa State University (Source: Clark and co-workers, Professional Animal Scientist 2015, page 412) indicates that internal parasite loads may affect calf performance and profitability in the feedlot. Calves were individually assessed for fecal egg counts upon arrival at the feedlot. They were divided into two groups that had high or low initial fecal egg counts. All the calves were dewormed after the initial evaluation. The high group tended to have lower weight gain during the first 4 weeks, but no differences were found in overall rate of gain throughout the entire feeding period. More high calves were treated for illness and received more frequent re-treatment than the low group. Therefore, the treatment costs were 4 times higher for calves with high initial fecal egg counts than the low calves.
Initial parasite loads did not impact final carcass weight or yield grade, but back fat and marbling scores were lower for high than low calves. Increased marbling scores often translate to higher quality grades and higher carcass values when sold on a grid. This data suggests that cow-calf producers that retain ownership through the feedlot would benefit from deworming the calves before sending them to feedlot. Likewise, producers who routinely sell to repeat customers may find that the dewormed calves will be popular with the cattle feeder that sees lower treatment costs and higher grading carcasses when sold.
“Cow/calf Corner” is a weekly newsletter edited by Dr. Glenn Selk, Extension cattle specialist emeritus at Oklahoma State University with contributions from additional OSU Extension specialists.