March 26, 2018
Mixed macroeconomic signals shake cattle markets
by Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist
So far in 2018, beef production is higher year over year as expected, with increased cattle slaughter and carcass weights. Beef demand has continued strong carrying forward momentum from 2017. Cattle prices, both feeder and fed, along with wholesale and retail beef prices have generally been higher year over year so far this year. Despite the challenges of growing cattle and beef supplies and seasonal pressure ahead in many markets, cattle market fundamentals are quite supportive and stable at this time. However, cash cattle prices recently dropped sharply, led by weaker feeder and live futures. This reflects the biggest threat to cattle markets: an increasingly turbulent and murky macroeconomic environment.
By some measures, the U.S. economy is quite strong after many months of steady, if plodding, recovery and growth. U.S. unemployment has continued to decline and is projected to average under four percent in 2018. The Federal Reserve, eyeing potential inflationary pressures as growth continues, raised interest rates last week for the sixth time since 2015. The recently enacted tax reform measures are an additional expansionary push for the economy that adds to Federal Reserve concerns about inflation and makes additional interest rate increases likely and more frequent. The Federal Reserve is currently projecting the economy to grow at 2.7 percent in 2018.
Simultaneously, the black cloud of trade uncertainty which has hung over markets for months has erupted into a storm in the past few days. The U.S. announcement of tariffs on imported steel and aluminum roiled markets and has prompted much speculation about potential retaliation among trade partners. While recent administration announcements significantly weaken the metal tariffs with numerous exemptions, uncertainty remains high. Subsequent announcements of tariffs on U.S. products are beginning, particularly with China, and the extent of further trade war escalation remains unknown. Likewise, the fate of NAFTA and other trade policy continues to add uncertainty to markets. The negative reaction in the stock market and futures markets last week is only the initial impact of a wide range of potential ripple effects in the economy. These negative trade impacts could threaten economic growth going forward
It’s as though the economy has one foot on the accelerator and another foot on the brakes, making it extremely difficult to figure out what happens next or, perhaps more importantly, what happens after that. Markets, in general, are increasingly scared and running for cover. The fear of the unknown may be the worst of it but the reality of the unknown could be far worse.
The result is an external environment for cattle markets that is especially difficult to sort out and anticipate. Should cattle producers be running for cover as well? Probably not yet but I recommend figuring out where cover is and how you can get there at a moment’s notice. Cattle producers need to closely monitor the broad range of macroeconomic and global conditions and be prepared to abruptly switch to a strongly defensive business strategy. Markets are increasingly volatile and it will be important to maintain as much short term flexibility as possible to deal with rapidly changing conditions. The uncertainty and volatility likely has not peaked yet but one hopes that it will be followed relatively soon by more clarity and stability. However, there is certainly no guarantee of that and producers must be prepared to hunker down and weather the storm.
Don’t let those heifers slip now!
by Glenn Selk, Oklahoma State University Emeritus Extension animal scientist
As we get closer to April and the breeding season for replacement heifers that are destined for a spring calving herd, proper nutritional management is more important than ever. In a “normal” year, (with fall rains and winter snows) cattle have been removed from wheat pasture at this time to maintain optimum grain yield. In most cases this winter the heifers have been fed supplement and hay. They will be turned in with the bulls or put on a synchronization program to be bred in April. In some cases this means that the heifers must be moved from one location to another that is closer to working facilities. The trick, of course, is to not let those heifers go on a steep downslide in body condition as we approach the breeding season. Research has shown that if heifers (near the time of reaching puberty) undergo a severe reduction in dietary intake of protein and especially energy, breeding success may be disappointing.
Oklahoma State University researchers have studied the impact of short term energy restriction on ovulation rates of cycling replacement heifers. This trial is reported in the 2001 OSU Animal Science Research Report. The effects of acutely restricting nutrition on ovulation and metabolic hormones were evaluated in Angus x Hereford heifers. All of the heifers were housed in individual pens in a barn and fed a diet supplying 120% of their maintenance requirements for protein and energy (1.2 M) for 10 days to allow time to adjust to the environment and diet. All of the heifers were determined to be cycling at the conclusion of this adjustment period. Then the heifers were split into two groups. Half of the heifers were then fed a diet supplying either 40% of their maintenance requirements (.4 M). The other half of the heifers were continued on the original diet that supplied 120% (1.2 M) of the maintenance requirements. All heifers were injected with prostaglandin so they should ovulate on about day 14 of the trial. Seventy percent (7 of 10) of .4 M heifers did not ovulate as a response to the injection, whereas all of the 1.2 M heifers had normal ovulation.
In this study, restricting nutrient intake for 14 days prevented ovulation in a large percentage of beef heifers without altering visible body condition. Heifers should be managed to avoid short-term nutrient restriction to maintain normal estrous cycles.
Cow-Calf Corner is a newsletter by the Oklahoma Cooperative Extension Agency.