Page 12 - MWC 2-3-2022s
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Across Ohio cow numbers                                The Midwest Cattleman · February 3, 2022 · P12
                                         are slightly up from 2020 at
      QUESTIONS A PLENTY                 302,000 head, up 4,000 cows        THREE QUESTIONS                   ing decisions are the starting
      continued from page 3              from a year ago. However,          continued from page 3             point for estimating the size
                                         Ohio cattle on feed num-           remain bullish on  the 2022       of the next crop. In addition
      talk about demand first.           bers are quite a bit lower,        market and think we will see      to the typical weather / yield
         What we often do not  down 20,000 head from one                    our  best spring calf market      impact on price, it will be very
      know, especially with regards  year ago. In 2020, Ohio had            since 2016, but unknowns          interesting to see if export lev-
      to fed cattle, is the balance  170,000 head on feed, com-             always exist. So, I wanted to     els continue at the brisk pace
      between supply and demand  pared to 150,000 in 2021. A                focus this discussion on three    that has been seen recently.
      of a given packer on a given  similar story can be said with          key questions that I think will   How much more culling
      harvest day. For a plant to  calf inventory down 35,000               drive this year’s calf market.    will we see of the cowherd?
      operate efficiently, it needs to  head from one year ago. Keep                                             There is no question that
      operate at capacity to cover  in mind that these are Janu-            How high will fed cattle          this beef cow herd is small-
      fixed costs associated with  ary 1, inventory numbers.                prices go?                        er now than it was one year
      daily operations.                     As I visit with some of our       Fed cattle prices typical-      ago. The only question is, how
         From the supply side of  colleagues in neighboring                 ly make their highs in the        much smaller is it? The West
      things, most packers fill a  states, similar trends can be            spring of the year and move       and the Northern Plains were
      day’s harvest with a combi- found with reduced brood                  downward through summer           dealing with drought most all
      nation of cattle that are for- cow numbers this year in               and  fall.  Last year, slaugh-    of last year, while conditions
      ward contracted, negotiated  Kentucky, as one example.                ter cattle prices improved by     in the Southern Plains turned
      or formula priced, and cattle         High demand for beef, both      about $17 per cwt from early      drier in  the fourth quarter.
      purchased on the cash mar- domestic and for exports                   October to early December         Dry conditions were definite-
      ket. Depending on where, and  during the pandemic, led                but did pull back a bit as we     ly a factor behind the cow
      who the packer is, the ratios  to higher-than-average cull            moved through December. As        slaughter  levels  of 2021, but
      between the three purchas- prices throughout 2021. It is              I write this on the morning of    disappointing calf markets
      ing avenues will vary greatly. likely that cow numbers will           January 10th,  April CME©         were also at play. It’s difficult
         Without getting too into  be lower this coming Janu-               Live Cattle futures are  on       to track cow numbers by re-
      the weeds on how cattle are  ary 1, and thus the coming               the board above $140 and the      gion throughout the year, but
      scheduled for harvest, one  2022 calf crop will be smaller            break to the June contract        cows appeared to be moving
      can deduce that if the supply  yet. Year-to-date  (December           is relatively small. Expecta-     in regions that were not deal-
      of contracted or negotiated  2021), beef cow slaughter na-            tions of fed cattle prices drove   ing with drought. I expect
      price  cattle is  limited, there  tionwide has been up 10 per-        heavy feeder  values  last fall   another decrease in beef cow
      is a need to purchase fed cat- cent according to Rabobank.            and the prices levels that are    numbers during 2022, and if
      tle on the cash or spot mar-       Into 2022                          actually reached this spring      dry conditions persist, that
      ket.                                  This increased cow slaugh-      will set the tone for much of     decrease will get even larger.
         When more than one pack-                                           2022.                                The first of the year is a good
      er at an auction is caught         ter total will lead US beef        What can we expect from           time to consider risk manage-
                                         production to be down an es-
      short  handed on  supply, the      timated  2.5 percent in  2022      feed prices?                      ment strategies.  There is no
      need to fill shackle spaces in-    (Rabobank).                          Focus in the grain markets      way  to know with  certainty
      creases demand for cash cat-          So, what will 2022 look like    has already turned to likely      what feeder cattle price lev-
      tle and thus creates higher        with regards to cattle prices?     2022 production levels.  The      els will be this summer and
      prices at the sale barn. This      Barring any setbacks or the        size of the South  American       fall. But as I write this article,
      is what happened the first         unknown, many industry ex-         crop is being discussed as we     August through November
      week of December when sev-         perts have projected cattle        speak, and the next couple        feeder cattle futures are all
      eral cattle sold at Ohio auc-      prices to be higher across the     months will be crucial as US      trading above $180 per cwt. It
      tions brought $150-160 cwt,        board in 2022.                     farmers make planting de-         has been some time since the
      with market report highs              Regionally, the demand for      cisions for the current year.     market has offered that type
      topping out at $169 cwt.                                              There has been a lot of talk      of pricing opportunity.
         As packers got caught back      high quality fed cattle from       lately  about  fertilizer  prices,
      up with committed cattle, we       major packing plants clos-         but new crop corn is on the
      followed that one week with        est to us (the two JBS beef        board in the mid-$5’s. Plant-
                                         plants in Pennsylvania and
      steady, yet softer prices in
      mid-December.                      Michigan, Cargill in PA, and
                                         the Tyson plant in Joslin, Illi-
      Inventory                          nois) looks to remain strong,
         On the national level, cow  as does the demand for local-
      inventory was down 1% in  ly produced beef as the over-
      July compared to last year.  all regional supply of cattle
      Cattle on feed in feedlots  decreases.
      with at least 1,000 head were         Agriculture is always a
      reported to be down also 1%  numbers game, and given the
      in October compared to 2020.  numbers we have currently
      Historically, cattle invento- available, there is cause for
      ry is still rather large, with  optimism in the beef cattle
      various plants running at re- business for 2022.
      duced capacity due to health
      and labor implications of the
      COVID pandemic.
         On a state level, according
      to the January 2021, USDA
      NASS  report Agriculture
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