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Weighing the market-July 2022

published: July 22nd 2022
by: Wes Ishmael

Cash feeder cattle prices continue strengthening seasonally, with added support from fewer available cattle as the year progresses. The CME Feeder Cattle Index was $172.62/cwt. on July 14. That was the highest level since December of 2015 and $12.54 more than a month earlier.


In mid-July market comments, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University pointed out fed cattle slaughter through the first half of the year was 0.6% more than the same period in 2021.


“However, fed steer slaughter was down 1.4% while fed heifer slaughter was up 3.8%,” Peel explained. “Heifer slaughter in the first half of the year was 52.1% of the January 1 inventory of other heifers. That is the highest rate of heifer slaughter in the first half of the year since 2004 and has averaged 48.3% in the past 15 years. Reduced beef heifer retention may lead to a decrease in the beef replacement heifer inventory of 2.5% or more.


Peel made the statement a few days ahead of USDA’s July Cattle report. He expected to see the beef cow inventory 2.5% to 3.0% less year over — the smallest inventory since 2015 — with beef cow slaughter 14.6% more than 2021 through the first half of this year. Last year's beef cow slaughter was 9% more year over year.


Similarly, in the early-July Cattle Market Notes Weekly, Josh Maples, Extension livestock economist at Mississippi State University noted year-to-date stocker and feeder cattle auction receipts were about 3% less than the same time last year.


“While the drop in auction receipts for 2022 is one indicator of tighter supplies, the mix of steers and heifers is also of interest,” Maples explained. “The percentage of heifers (in the auction mix) has ticked higher in recent years, which is another signal that herd expansion is not occurring. The average weekly heifer percentage is 44% so far in 2022. For reference, this average was 39% during the first six months of 2015 when the U.S. herd was in a rapid expansion phase and more heifers were being retained for breeding.”


So, it will take time to begin expanding the herd when drought eases.


“Cow culling can drop rather quickly if conditions improve but the availability of replacement heifers, especially bred heifers, may take a year or more,” Peel explains. “Heifer liquidation this year may mean that a limited supply of bred heifers is available next year. If drought conditions improve this summer/fall, it may be possible to save some additional replacement heifer calves, but most will not calve until 2024. Even if we can and want to, the ability to rebuild the beef cow herd may be limited in 2023.”


Beef demand underpinning fed cattle


Along the way, cash fed cattle prices are seasonally softer but remain higher than some would have guessed a couple of months ago. Apparent feedlot marketing currentness — especially in the North — bolstered by aggressive cattle harvest rates is one reason. Also, domestic consumer beef demand continues to support wholesale beef values and packer margins.


USDA's Economic Research Service increased the forecast average fed steer price (five-area direct) for this year by $1.20 to $141.30/cwt., in the July World Agricultural Supply and Demand Estimates (WASDE). That was based on prices reported in the second quarter and expected packer demand strength in the third quarter. Prices were forecast to be $139 in the third quarter and $145 in the fourth quarter.


The annual expected average fed steer price for next year was unchanged at $153.


International demand remains stellar


U.S. beef exports set new volume and value records in May, topping $1 billion for the fourth time this year, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).


May beef exports reached 135,006 metric tons (mt), up 1% from the previous high posted in May 2021. Export value climbed 20% to $1.09 billion, breaking the March 2022 record. For January through May, beef exports increased 4% from a year ago to 613,266 mt, valued at $5.14 billion (up 34%). Exports to leading markets South Korea, Japan and China/Hong Kong already topped $1 billion each through May, while shipments also trended significantly higher to Taiwan, the Caribbean, the ASEAN region, the Middle East and Central America.


“For U.S. beef exports to maintain a $1 billion-per-month pace is tremendous under any circumstances, but it is especially remarkable given the strong U.S. dollar, continued shipping and logistical challenges and the economic uncertainty our industry and international customers face today,” said USMEF President and CEO Dan Halstrom. “Across a wide range of markets, the momentum for retail beef sales achieved during the pandemic continues, and it’s now complemented by a strong rebound in the foodservice sector. May volume was actually down slightly to both Japan and South Korea, and yet exports still set a new record. That’s a great indication of soaring, broad-based demand for U.S. beef.”


May beef export value averaged $505.02 per head of fed slaughter, up 17% from a year ago, breaking the previous record ($503.68) set in January 2022. Through May, per-head value averaged $483.49, up 34% from the first five months of 2021.




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