April 2013 Articles

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Local Culling Decisions in the Face of a National Drought

Local Culling Decisions in the Face of a National Drought Source: Ross Pruitt, Department of Agricultural Economics and Agribusiness LSU AgCenter
It’s no secret that slaughter cow prices are seasonally lowest in the fall and seasonally highest in the springs. Producers often make the decision to cull a brood cow when the calf is weaned which normally occurs in the fall. This depresses slaughter cow prices as supplies increase with no offsetting increase in demand to keep prices steady. Through the first 31 weeks of 2012, U.S. beef cow slaughter is down 10% from the same time period last year. Region 6 slaughter (Arkansas, Louisiana, New Mexico, Oklahoma, and Texas) is down 23% from last year. Beef cow slaughter in Regions 5 (states surrounding the Great Lakes) and 9 (Arizona, California, Hawaii, and Nevada) are 5% and 8%, respectively, than a year ago. Regions 7 (Iowa, Kansas, Missouri, and Nebraska) and 8 (Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming) are not separately reported, but have sent an estimated 3.3% less beef cows to slaughter this year than last year.
While cattlemen in Louisiana have largely been fortunate to escape the drought that has covered the majority of the U.S. this summer, they will still feel the repercussions when considering whether to cull mature cows this fall or wait until the spring when prices will be higher. Cattlemen in other states may have experienced a mild winter earlier this year, but what hay was leftover or produced this spring is currently being fed to try and maintain as much of a producer’s existing herd as possible. Further complicating the issue is that hay stocks were down nationally on May 1st contributing to estimated U.S. total hay supply being 9% lower than a year ago. The national non-alfalfa hay price for July 2012 was $143/ton, an increase of 20% from last year when the drought was largely confined to the Southern Plains and Louisiana.
For those producers that have the pasture and other resources available this fall and winter, there will be an interesting question of whether to hold cows that would normally be culled in the fall into the spring and reap higher prices or stocker weaned calves on ryegrass pasture. There may be isolated cases where both can occur, but those instances will be rare. Estimated value of gains for stocker cattle this winter continues to be at least $1.10/lb. The harder those producers in drought stricken states cull the remainder of the year, the larger the downward pressure on cull cow prices this fall will be. This will also likely contribute to a stronger than normal rally in slaughter cow prices in the spring of 2013.
One of the consequences of the consumer backlash against lean finely textured beef was an increased need for slaughter cows due to the need for ground beef trimmings that are at least 90% lean. Prices for 90% lean beef trimmings have declined in recent weeks, but are still higher than a year ago. This will contribute to increased demand for slaughter cows in the spring, especially if pasture outlooks are improved and expansion in the U.S. beef cow herd can start to occur. It’s an interesting decision, but one that could ultimately net the producer a positive return should they be able to delay revenues this fall into the spring.