March 2, 2020
Decision-making in turbulent markets
By Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist
Global markets are being roiled by coronavirus (known as COVID-19) and cattle markets are no exception. The combination of broad-based market fears and current market impacts have taken a big toll. One of the functions of futures markets is to anticipate the worst and, not surprisingly, futures markets have taken the biggest hit. Cash fed and feeder cattle markets have seen the pressure grow as the uncertainty and fear have expanded recently.
Live cattle futures are down more than 12% from levels prior to the first wave of coronavirus news in January. Cash fed cattle prices are down about 7.5% over the same period. Feeder cattle futures dropped initially in January, then recovered significantly before dropping sharply in the past week. Cash feeder cattle prices have tried to follow seasonal patterns with stocker prices increasing seasonally until last week when the weight of lower futures and growing uncertainty in the global and U.S. COVID-19 situation pushed cash prices sharply lower. Feeder futures are down nearly 11% from January and cash prices for 450-500 lb. M/L #1 steers in Oklahoma dropped 6.0% just last week.
The situation with COVID-19 is another example of a “black swan” – rare, unforeseen events that have sudden, unexpected and dramatic impacts on markets. This situation, however, is different in a couple of fundamental ways from other such events in cattle markets, such as the packing plant fire last year or even the first BSE case in late 2003. First, those events were within the beef industry, whereas the coronavirus is a much broader and varied set of effects in U.S. and global economies. This makes it much harder to assess the multitude of different impacts that are occurring – or could – occur.
Secondly, the packing plant fire and BSE happened as a single event at a specific point in time and afterwards it was relatively easier to figure out the timelines of recovery. The current situation is not a single event; is still developing; and will end over a period of time at some point in the future. Clearly, the uncertainty has not peaked yet and the best we can hope for, from a market perspective, is that there will come a time when it appears the worst is over and we can see a path to a lengthy recovery in markets. It seems unlikely that any definitive news is forthcoming, certainly not in the next few weeks, which would allow markets to bounce back with any confidence.
Near term, I don’t see good prospects of waiting this situation out for a sudden market recovery. Cattle producers who have to make marketing decisions in the next 30-60 days for sure, and perhaps longer, should look for markets to remain weak with a decent prospect of getting weaker. Obviously, the news about COVID-19 is changing constantly and may support brief short-lived market bounces.
Longer term, I don’t think we are ready yet to change the overall outlook for the year, but the prospect is growing that we might have to trim back our expectations for 2020. Producers probably should not make dramatic changes to production and marketing plans just yet; but it would be a good idea to think about how you will adjust things if we have to shift from offense to defense for the entire year.
Try to avoid body condition loss now
By Glenn Selk, Oklahoma State University Emeritus Extension animal scientist
Cows in some Midwestern herds are calving (or already have calved) in marginal body condition. Unfortunately, this is a season where maintaining or gaining body condition on spring calving cows is really quite difficult. Warm season grasses have not yet begun to grow. Dormant grass (what little is left) is a low quality feed. Cows cannot, or will not, consume a large amount of standing dormant grass at this time year. If the only supplement being fed is a self-fed, self-limited protein source, the cows may become very deficient in energy. Remember, the instructions that accompany these self-fed supplements. They are to be fed along with free choice access to adequate quality forages.
There is another factor that compounds the problem. A small amount of winter annual grasses may begin to grow in native pastures. These are the first tastes of green grass many cows have seen since last summer. The cows may try to forage these high moisture, low energy density grasses, in lieu of more energy dense hays or cubes. The sad result is the loss of body condition in early lactation beef cows just before the breeding season is about to begin.
Body condition at the time of calving is the most important factor affecting rebreeding performance of normally managed beef cows. Nonetheless, condition changes after calving will have more subtle effects on rebreeding, especially in cows that are in marginal body condition. Body condition changes from the time the cow calves until she begins the breeding season can play a significant role in the rebreeding success story. This appears to be most important to those cows that calve in the marginal body condition score range of 4 or 5.
An Oklahoma State University trial illustrates the vulnerability of cows that calve in the body condition score of 5. Two groups of cows began the winter feeding period in similar body condition and calved in very similar body condition. Below is an example of a body condition score 5 cow.
However, after calving and before the breeding season began, one group was allowed to lose almost one full condition score. Below is an example of a cow in a body condition score 4.
The other group of cows was fed adequately to maintain the body condition that they had prior to calving. The difference in rebreeding rate was dramatic (73% vs 94%). (Wettemann, et al., 1987 Journ. Animal Sci., Suppl. 1:63). Again, this illustrates that cows that calve in the body condition score of 5 are very vulnerable to weather and suckling intensity stresses and ranchers must use good nutritional strategies after calving to avoid disappointing rebreeding performance.
Cows should calve in moderate to good condition (scores of 5 or 6) to ensure good rebreeding efficiency. Ideally, cows should be maintaining condition during mid to late pregnancy and (if possible) gaining during breeding. The goal of the management program should be to achieve these body conditions by making maximum use of the available forage resource.
Continue feeding a source of energy, such as moderate to good quality grass hay free choice and/or high energy cubes until the warm season grasses grow enough to provide both the energy and protein that the lactating cows need. Yes, the feed is high-priced. But the cost of losing 21% of next year’s calf crop is even greater!