Extension Education: Keeping an Eye on Feed
As we move further into the summer, there are two things to keep an eye on that will likely have an impact on cattle prices through this fall – both are feed. Forage will impact how many cattle, both calves and yearlings, can be sustained and carried until fall, as opposed to being pushed into feedlots early, and grain production will impact what feedlots will have to pay to finish cattle. The lower the corn price, the more aggressively feeders will bid for cattle.
While there are any number of other unforeseeable factors that may impact livestock prices, such as changes in beef demand, restrictions on exports, etc., grazing potential and expected feedlot break evens will undoubtedly play a major role in determining how high cattle prices rise or fall this season.
Luckily, you are be able to keep track of movements in these items throughout the season.
A good way to track grazing potential is to keep an eye on the Wyoming Crop Progress Report, which is updated weekly. Included in this publication is a report on range condition across the state. For example, this week’s report shows that 46 percent of the state’s rangelands are in either poor or very poor condition, while 17 percent are in good condition. Even with the current moisture, none of our state currently qualifies in excellent condition.
A nice feature of this report is the comparison to historical reports. For example, one of our state’s ranges improved from fair to good in the last week. However, during the same time last year, only 31 percent of our state was in either poor or very poor and 25 percent was reported as good.
So, it appears as though the recent precipitation has had a positive effect on range condition, but we are still starting behind where we were at the beginning of last year’s grazing season.
We are also well behind historical averages for our state. Over the last five years, on average, 57 percent of our state ranked as good or excellent by this time of the year.
You can find the Wyoming reports at nass.usda.gov/Statistics_by_State/Wyoming/Publications/Crop_Progress_&_Condition or simply search online for “Wyoming Crop Progress Report.”
While the Wyoming report is useful to gauge grazing potential locally, the national report can also be useful to inform restocking or destocking decisions.
If national range conditions worsen over the season as we saw last year, expect cattle prices to drop, while an improvement in range conditions could signal that producers have the capability to sustain or even expand herd sizes, which should help support prices.
In the last week, national range condition rated as poor or very poor has dropped from 33 percent to 30 percent, while good or excellent has increased from 34 percent to 38 percent. However, the same time last year saw only 19 percent of the nation’s rangeland rated as poor or very poor, while 51 percent was rated as good or excellent.
So, as with Wyoming’s rangelands, we are moving in the right direction, but are still behind where we would like to be. The national report is also compiled weekly and can be found at nass.usda.gov/Publications/National_Crop_Progress.
Expect cattle prices, and futures especially, to respond to these weekly reports, although due to the frequency of the reports, there are not often major surprises that move the markets too much.
Another item of interest to keep track of in the national publication is the corn progress report. The available data changes as the season progresses, and currently the USDA reports acres planted and acres of corn that have emerged. Later in the year, they will report the percent of the crop that has silked and dented, as well as a general condition of the nation’s crop.
I recommend paying more attention to national numbers for this report, as opposed to the Wyoming report, as our state produces very little corn as compared to the corn belt. Therefore, the national progress is what will ultimately drive corn prices.
The recent wet weather delayed a lot of fieldwork back east. However, it appears many farmers have been in the field last week. Current estimates are that 71 percent of the expected corn acres have been planted compared to a five-year average of 79 percent by the third week in May. Last week only an estimated 28 percent of acres had been planted.
Due to the late start, however, it should be of little surprise that emergence has been delayed. Currently only 19 percent of national acres have emerged, compared to the 73 percent emergence this same time last year.
With this news, one might expect corn prices, futures especially, to be seeing major increases. However, another useful USDA report, the World Agricultural Supply and Demand Estimates, or WASDE, predicts that even with the late planting we should see national corn production of over 14 billion bushels this year.
WASDE is important as it tries to account for global supply and demand. Current expectations are for record foreign corn production, mainly in South America, so the U.S. will have more corn available for domestic use as other countries contribute to the global market. Therefore, the USDA predicts the season average corn price to be around five dollars per bushel this year, down sharply from last year.
Keep in mind, however, that the USDA had a similar prediction about corn price this time last year, before the full effects of the drought were known. Given the complexity of the report, WASDE is only released monthly, and next month’s report, due out June 12, may have a different outlook. Given the more complex reports and the less frequent release, WASDE tends to have larger impacts on markets, so it will be useful to watch these reports closely. The WASDE report, as well as dates of release, can be found at usda.gov/oce/commodity/wasde.
I would recommend paying attention to both WASDE and the Crop Progress Reports, especially any trends in range condition and corn progress, as both are likely to have an impact on cattle prices.
If you need to destock, get your animals to market before large numbers of animals are pushed into feedlots and lower the prices, as would be expected if range condition deteriorates nationally.
If it looks like range conditions are improving nationally, it may pay to hold on to a few extra heifers this fall, as prices for those animals should rise as producers begin expansion.
Also, if you are in a good position as far as forage, and you see that the corn crop looks like it will reach current expectations, take advantage of mid-season reports and lock in some cattle at higher prices if corn futures remain low. That way, even if the corn crop struggles later, you will have reduced some of your downside risk.
Remember, we are in a period of extremely reduced supplies of feeder cattle, and if corn prices cooperate, you should be in a good position to demand high prices for your product.