What's Behind the Cattle Price Fluctuations?

US - Last year, cull cow prices were at a record high despite the relatively large beef cow slaughter levels.
calendar icon 31 July 2009
clock icon 3 minute read

Beef cow slaughter was high due to a drought in several cattle-producing regions of the U.S., including North Dakota, and sharply increasing input costs, such as feed, fuel and fertilizer.

However, cow prices have averaged about $5 per hundredweight (cwt) lower than last year. In mid-July, cow prices finally reached levels similar to last year, writes Tim Petry, a North Dakota State University economist.

According to him, there are several reasons for lower prices for the first half of this year. Although beef cow slaughter has been lower, total cow slaughter has averaged about 3 percent higher than in 2008.

The dairy industry has suffered with very low milk prices this year and dairy cow slaughter has been about 15 percent higher than last year. Increased milk production and lower domestic and export demand due to the weak world economy have caused weak prices.

A Cooperatives Working Together (CWT) dairy cow buyout program that accepted more than 100,000 dairy cows for slaughter during May through August has contributed to the increased slaughter. Details for the buyout are available on the CWT Web site at www.cwt.coop.

Cow prices did decline contra-seasonally about $6 per cwt in May during the early stages of the buyout. But the lower prices were not entirely due to the additional dairy cow sales.

Beef cow slaughter also increased due to more beef cows than normal being marketed at northern Plains markets. There were more calf deaths than usual this spring in parts of North Dakota, South Dakota and Montana due to a record snowfall, several severe spring snow storms and unprecedented flooding. Therefore, cows that lost calves were sold.

Last year at this time, the price for 90 percent lean, wholesale beef was surging, with increases in all commodity prices. Prices now are $15 per cwt lower than in 2008 because ample supplies of meat, especially pork, are available at lower prices than last year.

In addition, imports of manufacturing grade beef have increased 20 percent over last year’s historically low levels. Last year, imports of beef from Australia, the leading supplier of manufacturing grade beef to the U.S., were down about 25 percent from historical levels due to the low value of the U.S. dollar. This year, imports from Australia have increased back to historic levels as the U.S. dollar has increased in value and other countries that import beef have struggled with poor economic conditions.

What’s ahead for cow prices in the last half of 2009?

Although prices in mid-July were similar to last year’s levels, cow prices likely will not increase to the high levels reached last August. Instead, prices likely will level off for the rest of the summer.

The typical seasonal price pattern for cows shows a sharp decline in October and November, when heavy beef cow culling occurs. That scenario likely is to occur again this year.

Other factors that may contribute to the decline are that CWT is in the process of implementing another dairy cow buyout that could occur during the late fall marketing timeframe. The CWT Web site has more information.

In addition, the western Canadian cattle-producing provinces are experiencing abnormally dry conditions. If that dry pattern continues, Canadian cow imports, which so far have been near last year’s levels, could increase.

If possible, marketing cows before October or after December usually is a prudent marketing strategy. That very well could be the case again this year.

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