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Questions for the future of cattle markets haven’t changed the overall optimism for CattleFax as they look through the summer to the fall.

“Overall, the cattle industry should be profitable for all segments through the summer,” said CattleFax Analyst Mike Murphy during a May 24 Trends+ webinar. “The stocker segment will be profitable into the third quarter, and the cow/calf segment will also have some positive margin into the fall timeframe, as well.”

Murphy looked at trends from the last year and combined them with continued expansion to forecast, a $1.50 average for 550-pound calves and a worst-case scenario for fed cattle at $1.12.

Moving through summer

“Fed cattle traded May 24 at $1.32,” Murphy said. “We’re close to the launching point we experienced over the last few weeks, and we believe the market is going to break down and break the trend.”

He continued, “The key is, as we look at this pattern, we went from the middle of October to the middle of April where we found highs in the fed cattle market.”

The roughly six-month trend can be juxtaposed to the market correction last year, where highs were seen in March and lows bottomed out in October.

“If we have the same sort of pattern in April, we could go into November before we find the fed cattle lows this year,” Murphy emphasized. “That puts more price pressure on the calf market at the tail end of the calf run.”

Challenges

In evaluating concerns for the future of the market, Murphy saw challenges as it related to capacity at the packing houses.

“Last fall, we saw challenges in the market that related to lack of packing capacity. Obviously, it had impacts at the fed cattle level, but they spilled into the cow/calf sector, as well,” he said. “That issue has not been resolved.”

He described that, at the brick-and-mortar level, capacity exists, but rather, a lack of available labor creates problems.

“We have to kill more cattle now in relationship to a year ago,” Murphy said. “That becomes a little bit of a concern. We are going to get a few more harvested each week going forward, which doesn’t put quite as much pressure on a Saturday kill, but it’s still significant.”

Murphy added an incentive will be necessary for packers to harvest cattle at a timely rate to avoid a dramatic downturn in the market.

“Unfortunately, the timing of where we could see problems is right during the fall calf run, so we’ve got to be conscious of that,” he said. “The market is going to have to provide an incentive to get cattle harvested.”

Packer level

Currently, however, Murphy added the market is already incentivizing packers to harvest cattle at active rates, which is positive.

“It’s positive to provide a margin to packers to get cattle harvested and be more aggressive,” he explained. “The more we provide incentives, the less risk we’ll have of repeating the flush-out mode we saw in the market last fall, which led to the big drop in the value of calves.”

Additionally, the relationship between fed cattle and retail is also important.

“We’ve had a significant re-alignment with the margin at retail,” he said. “Last fall, we were receiving between 16 and 18 percent of retail price, which was a historical low level, which only compounded the effect of trying to clear inventor through the system.”

The result was painful margins and returns for all segments of the cattle industry.

“We recovered an enormous amount of that percentage, and we pushed the market back up to the mid-1.40s at the fed cattle level,” Murphy said.

Looking forward

As he looks at the future of fed cattle prices, Murphy used a benchmark of 18 to 19 percent of retail price as a foundation.

“Every one percent change we have in this ration is worth about $5.50 to the market,” he explained. “When we had six percentage points, that’s worth about $33.”

Subtracting the $33 from highs of $1.45, Murphy sees a low-end to the market of $1.12.

“We can work from there to assess the value for feeder cattle and calves as we look at the fall,” he said.

He also noted, however, that cash is two to four percent better than the deferred futures.

For feeder cattle and calves, Murphy sees a bumpy downward trend, likely close to $1.40 for calves, with about a $30 spread between feeders and fed cattle.

“When we take that one step further and the timing a bit later into the fall, I think we’ll see a long-term average 10 percent premium, which would put a 550-pound calf at $1.50,” Murphy said. “We’ll see a premium in the north and discounts going toward the south, as well.”

The Trends+ webinar was sponsored by Elanco Animal Health. Look for more from this webinar in next week’s Roundup.

Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

With producers retaining more heifers and increasing their cattle herds and domestic beef consumption remaining stable, the beef industry is going to have to seek out export markets to sell the extra beef they produce, experts say.

Stephen Koontz, agriculture and resource economist with Colorado State University (CSU), told cattle producers during a recent seminar that, with more production, cattle prices will stay low unless there is more consumption.

He projected fat cattle prices to be $1.30 to $1.35, and the feeder cattle market at $1.30 to $1.70. Koontz thinks those in the cattle business will see these prices for at least two more years.

Heifer slaughter

“Heifer slaughter has really declined,” Koontz noted. “We will have herd expansion until no one wants another cow, which I am predicting will be sometime in 2018.”

“Cow slaughter is starting to moderate, which is driving those prices lower,” he explained. “If we want to be in the cow business in the next 10 years, the next two years is the time to get into it. But, do it slowly and take on little to no debt.”

Exports add $1 billion to $3 billion in trade to the beef industry. The top export markets for beef are Canada, Japan, Mexico and South Korea, with Japan being the largest market. But, all eyes are on China, which could become a big contender in the future.

“Exports are going to drive the cattle market in the coming years,” he said. “Our growth in the beef industry will have to come from exports, because the U.S. consumer will not eat any more beef.”

Getting cattle verified

RaeMarie Knowles with the Ranchers Connecting Ranches (RCR) program talked with producers about verification opportunities that could earn them more for the beef they produce. Before starting the RCR program, Knowles conducted a lot of verification audits through USDA, which gave her an opportunity to find out what beef producers and feeders liked and didn’t like about the process.

“Verification is important to the beef industry because it gives producers a way to source and age verify their cattle,” she explained, adding that all these programs have to start at the ranch level, and cattle can-not be back-tracked. 

After the first bovine spongiform encephalopathy incident in the U.S., Japan would only take cattle harvested under 21 months of age, which made source and age verification audits really important. Since then, Japan has increased the age requirement to 30 months, which has decreased the premium for participating in this program from $35 a head to about $2.20, she says.

Other countries also have requirements American producers have to meet if they want to export beef. The European Union requires beef imported into their country be documented as non-hormone treated cattle (NHTC). Saudi Arabia has set new requirements for beef that require they don’t contain certain proteins, and beef tallow must come from a certified renderer and be blessed.

Consumer requirements

Knowles told producers RCR cannot only help satisfy export requirements but provide traceability to the source, which instills consumer confidence that cattle were humanely handled and harvested.

“It is another way we can tell our story,” she explained. “It adds transparent credibility to all the things ranchers already do right.”

Knowles said ranchers and feedyards can both utilize the services RCR provides.

She said, “We can accommodate all sizes of producers, and our program is a national program that covers all 50 states. We have auditors from California to Florida.”

“RCR is a cohesive program that adds credibility to what ranchers are doing,” she told producers.

RCR offers several verification programs including RCR Natural, RCR Natural and Gently Raised, Grassfed and Feed Bunk-ready vaccination verified.

Educating consumers

Greg Bloom with the Colorado Beef Council told producers that consumers are becoming more and more disconnected from agriculture.

“Our job is to connect these consumers to our beef community,” he said.

The Colorado Beef Council works with CSU to provide producers with beef quality assurance training and also provides beef promotion and education, beef grants with schools, a beef running team, BBQ University, retail training of meat department workers and food service and culinary training with chefs.

Bloom shared the importance of export markets to the beef industry.

“Other markets are willing to pay more for certain cuts than we are here in the U.S. Cuts like beef lips, tongues, livers, boneless short ribs, short plate, which is beef belly, and chuck short ribs are in more demand in other countries than they are here,” he explained. “In fact, we are approaching $280 per head in added value we get out of each carcass in cuts that are exported.”

With domestic consumption staying relatively the same year after year, Bloom said it is important to teach millennials that beef isn’t bad for them.

“Consumer concerns range from hormone use in beef production, feedyard sustainability and humane handling to antibiotics, grassfed animals and use of resources,” he explained.

“Colorado has a real advantage because we have a large enough population here to do a lot of farm-to-plate tours. It helps consumers better understand how beef is produced and why we do certain things,” he said.

Gayle Smith is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to This email address is being protected from spambots. You need JavaScript enabled to view it..

Paul Dykstra, beef cattle specialist for Certified Angus Beef (CAB), notes that 2016 continued a decade-long trend of increase quality in carcass grades for beef.

“We saw the highest level over that period of time in 2016 of Choice and Prime-graded carcasses,” Dykstra says. “We saw a one percentage point increase in the Choice grade, but again, that was the highest point that we’ve seen in modern history.”

The trend, he emphasizes, is towards very, very high-quality beef.

In addition with the increase in Choice beef, 5.5 percent of steer and heifer harvests graded Prime beef, and 28.9 percent of Angus-influenced cattle qualified for the CAB mark.

“The premiums are very, very good for all of the higher-quality product today, even though we have more supply than we’re used to,” Dykstra continues, “and the market is still very, very good.”

Looking deeper, Dykstra adds that the value of Choice beef over Select beef is up an additional $3.47 per hundredweight in 2016.

“The box beef premium increased about five dollars a hundredweight in 2016 over the prior year,” he says. “Again, we’re looking at a year that was the all-time record in terms of tonnage, with over one billion pounds.”

He adds, “It’s a strong statement for the demand that exists for higher-quality product, even when supplies are at record levels.”

Higher prices haven’t scared customers away from the protein product, and in fact, demand has increased for high quality beef.

“We’ve seen beef at a very high price point, undoubtedly as we compare to pork and poultry,” Dykstra says. “When folks go out and spend their grocery money or go out to eat a nice meal, they’re willing to spend more as long as they are faced with the promise of quality and a great eating experience.”

In 2017 thus far, beef has continued its positive trend, with 80 percent of steers and heifers grading Choice and Prime in the last several weeks.

Dykstra presented during CAB’s weekly video news program, “Angus VNR.” Learn more at angus.org.

Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Washington, D.C. – “Many things have changed since last year, giving us plenty to talk about,” said USDA’s Chief Economist Robert Johansson during the Feb. 25-26 USDA Agricultural Outlook Forum.

Johansson cited events such as the apparent break in California’s record-breaking drought, the largest corn and soybeans crops produced in the U.S. and China’s impacts on global corn and cotton stocks.

“Farm productivity continues to advance, and exports are increasing, yet farm income has fallen over the last several years more quickly than at any time since the mid-1970s,” he added. “Market sentiment, like market signals, is mixed.”

Ecnomic well being

Johansson highlighted a number of indicies that all highlight increased optimism from farmers, consumers, businesses and home builders, compared to last year.

“Bankers seem more reflective, with the Federal Reserve survey of banks on the likelihood of loan repayment rates tracking fairly close to a declining index of corn prices received by farmers,” he said. “As corn prices fall, bankers believe they will see lower loan repayment rates.”

Regardless of general bankers' concern, Johansson looked at farm income trends, farm programs and price outlook and how they impact the mixed sentiments reflected in the marketplace.

Income

“Farm income is headed sideways,” said Johansson. “When Congress debated the 2014 Farm Bill, the United States was recovering from the Great Recession and just coming off the highest levels of federal deficits since World War II.”

Farm income peaked at the same time in 2013, reaching $120 billion.

“Today, many producers are in a different situation,” he added. “Farm income has fallen dramatically since 2013, falling almost 30 percent in real terms.”

Johansson emphasized, “That is the largest four-year drop in farm income in 40 years, when real farm income fell more than 45 percent between 1973 and 1977.”

Despite those declines, farmland values remain strong, according to Johansson.

The debt-to-asset ratio of farmers is also relatively low, said Johansson, at 12.9 percent, up from the low point in 2012 at 11.3 percent and well below 1985’s 22.2 percent.

“With interest rates remaining low, high levels of debt are not associated with the very high interest payments we saw in the 1980s,” Johansson described. “At their peak, interest payments relative to net farm income in 1985 exceeded 60 percent. Today, they remain close to 20 percent.”

Land value

“Another place we might expect to see the tightening financial situation reflected is in land value and rental rates for farmland as farming profitability erodes,” Johansson said, noting that a large part of farm costs come from buying or rending land. “Land values are also the largest component of the relatively strong asset base of U.S. agriculture today.”

The National Agricultural Statistics Service has reported a slight decline in land rents and values recently, as compared to increases seen in 2011 and 2012.

Meat prices

Looking toward the livestock and dairy industries, Johansson said, “Lower feed costs and improved forage conditions provided the impetus for expansion of flocks and herds.”

“We project that total meat and poultry production will hit another record high of more than 100 billion pounds in 2017, as production of beef, pork, broiler and turkey all increase,” Johansson commented. “Milk production is also projected to reach a record 217.4 billion pounds in 2017, with later-year herd expansion and growth in milk per cow.”

Looking at beef production, Johansson said that supplies of cattle have increased, with the third straight year of herd expansion and falling feed prices, coupled with improved forage and pasture conditions, have continued to encourage expansion.

“Meat and poultry production in 2017 is expected to outpace demand,” Johansson said. “Thus, we are projecting lower prices for cattle and hogs, with broiler prices relatively flat compared to last year’s levels.”

He noted that fed steer prices are forecasted to drop seven percent to $112 per hundredweight.

Trade opportunity

“The marketing outlook shows opportunities for trade,” Johansson commented. “Increasing agricultural trade remains a key component of future growth in the agricultural economy.”

Strong competition and reduced demand reduced export sales for fiscal year 2016, but improved conditions continue to generate more demand for fiscal year 2017.

“Global gross domestic product per capita is forecast up 1.6 percent in 2017,” Johansson said, noting that income growth is expected in Brazil, Russia, India, Indonesia and China. “Overall, U.S. agricultural exports are forecast at $136 billion for fiscal year 2017, with a rebound in Chinese demand and strong export sales in the beginning of this year.”

Exports to China are projected to hit $22.3 billion, a $3 billion increase over last year, and exports to Canada and Mexico are also forecasted to increase.

“Domestic U.S. consumption can only grow so much, given our projection of U.S. population and income growth,” Johansson said. “Furthermore, U.S. livestock can only eat so much feed, and alternative uses such as ethanol are assumed to be relatively stable over the next 10 years.”

He continued, “As a result, increases in beef, pork, poultry, dairy, feed, food grains and oilseeds for the most part need to be sold abroad.”

Johansson and USDA note that long-run expectations support increases in trade, consumption, trade and prices, which lead to a continued competitive trade environment in 2017.

Johansson commented, “Over the next several years, the agricultural sector as a whole will continue to adjust to lower prices for most farm commodities in both the United States and abroad.”

Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

The U.S. beef industry is continually working toward higher-quality cattle, but a recent segment from Certified Angus Beef’s Angus VNR, Allan Sents of McPherson County Feeders noted that an increased genetic focus will be required as markets continue to change.

“As we go forward, especially in times of tight margins and the risks that we have in the market place, anything that can be done genetically to narrow that down and to focus on some of the premiums that are possible that way I think gives the cow/calf producer especially a great advantage, perhaps as much as anyone in the industry to take advantage and to be rewarded for the effort that they can put into improving genetics that way,” Sents said.

He noted that cow/calf producers have been responsible for the improvement in quality of the past several years as a result of smart genetic selection.

Sents explained, “Genetics is a huge factor, and we know that there is great variation, even within breeds in terms of genetic potential of the cattle. It is interesting and encouraging to see what progress can be made as people focus on quality.”

It is equally important, he added, to not lose track of cutability and growth in production.

As a smaller feedyard in Marquette, Kans., Sents says they are able to focus on harnessing the genetic potential of the cattle. 

“We can focus more on individual sorting, attention to customers, knowing their history and knowing what their cattle are capable of,” he explains. “We do actively sort cattle to try and maximize their potential and harvest them before they have been around too long.”

But despite the benefits they have seen recently, Sents noted that they are still working to make adjustments and improve, always seeking to optimize the potential of cattle.

He commented, “The biggest adjustment I think we could make from a management standpoint is being aware of the potential of the cattle and then using our sorting and then evaluating which particular grid might be best to market the cattle and get the best premium we can for our customer that way.”

Saige Albert, managing editor of the Wyoming Livestock Roundup, compiled this article from a recent segment of Angus VNR. Watch the full segment on YouTube or by visiting cabpartners.com or angus.org.