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Numbers Down, Prices Up

Written by Dennis Sun

Reading through the beef and cattle markets earlier this past week bodes well for the rest of the year and maybe beyond that. We have to be careful not to jinx the markets, but that is going to be hard to do. 

Bull markets late last week went crazy. I should say they went really well – with a $7,200 average on two-year-old Hereford bulls and $8,572 average on Angus bulls. Sounds high, but it doesn’t take too many yearlings at today’s prices to buy a bull, does it? 

According to Drovers CattleNetwork, total cattle slaughter was down 7.2 percent through Nov. 1 compared to last year, and this past October, it dropped even more, down 9.2 percent year-over-year. 

Steer slaughter for the year has dropped less than any other cattle class and has averaged 52.1 percent of the total cattle slaughter so far this year, but the total steer slaughter this year-to-date is down 3.4 percent, which is a good sign of fewer cattle numbers. Steer numbers dropped even more in October. One factor that made up for the reduction in steer numbers was the heavy steer slaughter weights packinghouses have been seeing lately. 

Heifer slaughter really told the story of the year so far. Heifer slaughter so far this year fell 8.7 percent, with heifers accounting for 28.2 percent of the total cattle slaughter. October heifer slaughter was down 6.3 percent. Last year, annual heifer slaughter was down 1.5 percent from 2012, and in October, it was up over five percent from the previous year. This figure indicates replacements were diverted into feedlots due to the drought conditions in some parts of the country. The sustained decrease in heifer slaughter in 2014 is a good indication of more heifer retention. 

So now we come to cow slaughter, which is down 14.5 percent, and beef cow slaughter is down 18.1 percent for the year-to-date. Beef cow slaughter is a smaller percentage of the total cattle slaughter from a year ago as some producers are keeping older cows to get another calf out of them. Some producer may have turned the bulls back with their dry cows. We never thought that would happen, did we?

I read one report from Livestock Monitor that said, “While consumers are being offered less beef currently, largely reflecting production reductions, there is nothing forcing consumers to pay 14 percent more for beef, and the fact they voluntarily do so is a very positive thing for all industry stakeholders.”

Something we don’t think about too often is the prices for cattle hides. One steer hide can produce enough leather for 11 cowboy boots, 20 footballs or one sports car bucket seat. Demand for leather goods is increasing, and hide numbers are decreasing. Hide prices between 1995 through 2008 usually ranged between $60 and $80 per hide. A couple of weeks ago the price for a heavy steer hide was $112.95, so anything made from leather is going to cost more worldwide. We will see much less expensive lower grades of leather, more canvas and synthetic leather-like products. Some have even suggested changes in luxury women’s boots toward shorter, ankle high styles, in part due to higher wholesale leather costs. 

I sure hope they don’t mess with the boots I buy. I’ll have some dirty socks.