Oct. 8, 2018
The beef balance sheet
by Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist
Supply and demand flows for most agricultural markets are commonly summarized in the form of supply and utilization tables, often called the balance sheet. The balance sheet generally includes supply components as: Beginning Stocks + Imports + Production = Total Supply. Utilization includes demand components as: Exports + Total Use + Ending Stocks = Total Utilization.
For some commodities, use may be disaggregated into several use categories. For beef, total use is not directly measured and thus is calculated as Total Disappearance from other balance sheet categories. The Livestock Marketing Information Center (LMIC) provides supply and utilization tables for meat commodities along with feedgrain and hay markets which include current and recent balance sheet values as well as forecasts for the next couple of years. All values reported below are annual totals.
The current LMIC beef balance sheet projects beef total supply for 2018 at 30.763 billion pounds including Beginning Stocks of 649 million pounds; Total Production of 27.102 billion pounds and Imports of 3.012 billion pounds. In contrast to grain markets, beginning and ending stocks of beef are minor (2018 beginning stocks are 2.1 percent of total supply) because the perishable nature of meat precludes large carryover from year to year. Beginning and ending stocks consist of cold storage holdings plus short term pipeline supplies of beef in wholesale and retail markets.
Beef utilization in 2018 is estimated as: Exports, 3.149 billion pounds; Total Disappearance of 26.824 billion pounds; and Ending Stocks of 790 million pounds. This level of total disappearance is equivalent to domestic per capita beef consumption of 57.2 pounds (retail basis). The balance sheet accounts for all supply among the various demand categories.
Compared to the 2017 beef balance sheet, projected 2018 values show beginning stocks down by 14.3 percent; total production which includes commercial production plus a minor amount of farm production, up by 3.2 percent; and imports up fractionally by 0.6 percent, all leading to total supply up 2.5 percent year over year. On the demand side, exports are projected up 10.1 percent; total disappearance, up 1.2 percent; and ending stocks up 21.7 percent. Per capita consumption in 2018 is projected to be up 0.5 percent from 2017.
Current forecasts for 2019 include beginning stocks up 21.7 percent year over year; total production up 1.7 percent; and imports down 4.5 percent leading to a total supply up 1.6 percent year over year. Exports are forecast to increase 2.7 percent in 2019; total disappearance is projected to increase 1.5 percent and ending stocks to decrease by 0.6 percent. Per capita consumption in 2019 is forecast to increase to 57.6 pounds, up 0.7 percent year over year.
The current balance sheet estimates will change. Balance sheet projections and forecasts are revised regularly to reflect new information and changing market conditions. Beef production is relatively easier to forecast given that animal numbers which will factor into beef supply are already on the ground, but total supply will reflect less certain impacts of changing carcass weights and dairy sector contributions to beef supply. Of course, supply or demand shocks such as major drought impacts, disease outbreaks or other factors may appear unexpectedly at any time. Beef exports and imports are particularly difficult to forecast given the volatility and uncertainty of the current global market situation.
Know the USDA cull cow grades before you send them to market
by Glenn Selk, Oklahoma State University Emeritus Extension animal scientist
Some culling of beef cows occurs in most herds every year. The Beef Audits have generally shown that cull cows, bulls, and cull dairy cows make up about 20 percent of the beef available for consumption in the United States. About half of this group (or 10 percent of the beef supply) comes from cull beef cows.
Whether we are culling because of drought or to improve the productivity of the herd, it is important to understand the values placed on cull cows intended for slaughter.
The USDA market news service reports on four classes of cull cows (not destined to be replacements). The four classes are divided primarily on fatness. The highest conditioned cull cows are reported as “Breakers.” They usually are quite fleshy and generally have excellent dressing percentages. Body condition score 7 and above are required to be “Breakers.”
The next class is a more moderate conditioned group of cows called “Boning Utility.” These cows usually would fall in the body condition score grades of 5 to 7. Many well-nourished commercial beef cows would be graded “Boning utility” cows.
The last two grades of cows as reported by the market news service are the “Leans” and “Lights.” These cows are very thin with Body Condition Scores (BCS) 1 to 4. They are in general expected to be lower in dressing percentage than the fleshier cows and are more easily bruised while being transported than are cows in better body condition. “Lights” are thin cows that are very small and would have very low hot carcass weights.
Leans and Lights are nearly always lower in price per pound than are the Boning Utility and the Breakers. “Lights” often bring the lowest price per pound because the amount of saleable product is small, even though the overhead costs of slaughtering and processing are about the same as larger, fleshier cows. Also, thin cows are more susceptible to bruising while in transit to market and to the harvest plant. Therefore, more trim loss is likely to occur with thin cull cows than with those in better body condition.
Producers that sell cull cows should pay close attention to the market news reports about the price differentials of the cows in these classes. Cull cows that can be fed enough to gain body condition to improve from the Lean class to Boning Utility class can gain weight and gain in value per pound at the same time. Seldom, if ever, does this situation exist elsewhere in the beef business.
Therefore, during the fall and early winter, market your cull cows while still in good enough condition to fall in the Boning Utility grade. If cows are being culled while very thin, consider short term dry lot feeding to take them up in weight and up in grade. This usually can be done in about 50 to 70 days with excellent feed efficiency. Rarely does it pay to feed enough to move the cows to “Breaker” class. There is very little, if any, price per pound advantage of Breakers over Boning Utility and cows lose feed efficiency if fed to that degree of fatness.
Dressing percentage within each of the four grades will also play a major role in the price per pound of cull cows. Dressing percentage will be discussed in next week’s Cow Calf Corner newsletter. The current cow and bull market for Oklahoma City National can be found at this web link. https://www.ams.usda.gov/mnreports/ko_ls151.txt