Cold and wet spring adds to cattle management, marketing challenges

Markets
Apr 4, 2014
by WLJ

A myriad of factors are at work in cattle and beef markets now. Spring has arrived, according to the calendar, but it isn’t obvious yet in many parts of the country. Cold weather continues to delay grass greenup in many regions in a fashion that is reminiscent of last year. In some parts of the country it is not only cold but wet. Other parts of the country are cold and dry and getting drier in some cases. Oklahoma captures this contrast well with parts of the state that have received abundant moisture recently while persistent drought in other areas is moving into the fourth year.

Warm weather will produce forage growth in wet areas but in the dry regions the clock is ticking on spring forage prospects. Moisture is critically needed in drought regions in the next 30-60 days. Hay supplies on Dec. 1, 2013 were up sharply from 2012 record low levels in the country and in most individual regions, as well. However, the extended cold spring has resulted in increased hay use in many areas and carryover hay supplies will be minimal in some areas.

Record feeder cattle prices this spring may increase seasonally a bit more into mid-year. However, grazing demand for summer stockers may be limited soon if drought conditions persist or expand. Heifer and breeding cow markets have strengthened thus far in the year but are also contingent on forage conditions.

Herd expansion plans are on the ground in many regions but the ability to follow through with those plans is critically dependent on moisture in the next few weeks. If drought conditions abate in dry areas, considerable more female demand may yet be revealed this spring.

At the same time, boxed beef markets appear to have peaked on the second rollercoaster top this year. Wholesale beef values dropped sharply last week, putting packer margins back in the red against stable record fed cattle prices. Fed cattle prices may be at the spring peak but are expected to decrease more slowly through April and into the May/June peaks in fed cattle marketings.

Feedlot margins will also be squeezed over the next few weeks with building seasonal fed cattle price pressure. Record high feeder cattle prices in recent months will keep feedlot breakevens high in the coming months. Though beef demand appears to be holding strong thus far, there is considerable uncertainty about how it will hold up through the middle of the year as more of the higher wholesale beef values get passed through to retail.

The dramatic increase in hog and pork prices recently is impacting the beef sector, as well. The pork industry is full of uncertainty about the impacts of PEDv in the next two quarters and perhaps beyond. The latest USDA Hog and Pig report did not indicate nearly as much decrease in hog numbers as analysts expected and therefore adds to the uncertainty.

Beef and pork are supporting each other in wholesale markets with higher prices at the current time. It is not known at this time how much reduction in pork supply is ahead and for how long. More importantly, though disease control efforts have not been successful so far, it is likely that the disease will be controlled and when it is there could be a big rebound in pork production very quickly. It won’t happen before the fourth quarter and perhaps not in 2014 but it is something that beef producers will keep an eye on in the coming weeks and months. — Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

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