Cull cow cutout values remain steady
Over the last few years, cow/calf producers have noticed increasing value in cull cows. Common questions University of Nebraska-Lincoln (UNL) Assistant Professor and Livestock Extension Economist Elliott Dennis receives regarding this increase in cutout value are: “Why are prices higher now than in previous years?” and “Will prices remain high into 2022?”
To answer these questions, Dennis shares his thoughts in his In the Cattle Markets newsletter, as well as discusses market fundamentals with UNL Beef Extension Educator Aaron Berger in the BeefWatch podcast.
Berger notes cull cow income accounts for anywhere between 15 to 20 percent of gross receipts for cow/calf producers, and November and December are typically months with lower cull cow prices, but this year is unusual.
Cull cow price variations
“We have been seeing atypical seasonal patterns,” Dennis explains. “Generally, as people start to early wean and cull cows July through September, the price drops. This year, prices accelerated through the summer, and since around August, cutter cow cutout prices have been sitting steady to slightly increasing.”
In 2014-15, a similar trend was seen when the mid-summer price stayed constant through early 2015, and prices fell during the fall of 2015, Dennis shares.
“I think there are market fundamentals which could potentially have this period of extended higher cull cow prices be longer,” he continues. “The cow cycle is still in a contraction period, so there are still a lot of market incentives to bring cull cows to market.”
In addition, Dennis shares this trend could be explained by drought and the price of feed including corn and hay, as well as current beef prices. On the demand side, domestic beef demand is high – 15 percent higher than demand in 2014-15.
“These are all really strong indicators that cutout values will probably remain high as packers want to incentivize more cows to come to town, they continue to hold the cutter cow price or even increase the price,” he explains. “Those and other reasons are strong indicators the cull cow market should stay elevated in coming months.”
Dennis shares stronger demand for beef products is related to exports and the economy.
“Beef in particular is very sensitive to consumer income, so we know when people have more income,” he says. “For example, the government has been transferring money through stimulus packages – and while not everyone has a lot of money, there has been quite a bit of profits made this year.”
Dennis speculates the stimulus packages and increased profits have increased consumer desire to spend more for beef. This, accompanied with foodservice shutdowns and inflation, have increased beef exports and put pressure on increasing beef prices.
The two primary uses for cull cows in the beef supply are ground beef and merchandisable beef cuts, including ribs, chuck and tenderloin.
“The available supply into this market comes from 1) beef cows and bulls, 2) dairy cows, 3) trimmings and grind from steer and heifer slaughter and 4) beef imports,” Dennis shares in his newsletter. “These separate markets combine to impact the supply, and in part, the prices received for cull cows. In the current year, we have seen an increase in beef cows and bulls harvested as the national cowherd contracts, and increase in dairy cow culling, volatile steer and heifer slaughter and slightly higher beef and veal imports.”
All of this combined, Dennis suggests, signal higher supplies of ground beef to the market. Typically, this action would be thought to reduce price, however, demand for ground beef has been historically strong.
“From this, we likely conclude the rise in wholesale and producer cull cow prices is driven more by demand than supply signals,” he says.
Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.