Slaughter Cow Markets

 

As the fall concludes, livestock market analysts have been closely following feeder cattle markets. This time of year corresponds to when most spring-born, fall-weaned calves are sold. In last week’s Cattle Market Notes, Dr. Kenny Burdine made several important points about the November cattle on feed report. We will come back to one of those points that he made shortly.

 

In addition to feeder cattle markets, the fall is also an important time of year for slaughter cattle markets as many cattle producers across the country make culling decisions. Because of this, an update on slaughter cow markets is warranted. The first figure provides prices for 85-90% lean slaughter cows sold in AR, KY, and MS. The most recent available data is for the week ending November 22, 2020. For that week, average slaughter cow prices were $38.79/cwt, $42.49/cwt, and $35.38/cwt for AR, KY, and MS, respectively. These prices correspond to a 13%, 0%, and 3% week-over-week change.

 

Cull cow prices tend to reach a seasonal low point in the fall. Still, 2020 cull cow prices remain above 2019 levels. Specifically, cull cow prices for the week ending November 22, 2020, were 19%, 14%, and 0% above 2019 prices for the same week for AR, KY, and MS, respectively. More broadly, in AR and KY, Sep-Nov prices averaged 6% and 10% above 2019 prices. In MS, Oct-Nov prices averaged 7% above 2019 prices.

 

Regional beef cow slaughter has also averaged well-above 2019 in parts of the country. In region 6, which corresponds to AR, LA, NM, OK, and TX, Sep-Nov beef cow slaughter has averaged 11% above 2019 slaughter for the same period. Region 4, which refers to AL, FL, GA, KY, MS, NC, SC, and TN, beef cow slaughter has more closely tracked 2019 this fall. Region 4 Sep-Nov beef cow slaughter has averaged 1% below 2019 slaughter.

 

There are both supply and demand-side factors that have likely contributed to what we have seen play out this year in slaughter cow markets. Beef cows are an input for ground beef production. We have witnessed periods of higher demand for ground beef this year with an uncertain eating environment due to COVID-19. At the same time, COVID-19 stressed processing capacity, and market-ready cattle were kept on feed longer. As a result, as Dr. Burdine discussed last week, average dressed weights have been above 2019 average dressed weights. Specifically, last week’s article points to harvest steer weights that averaged 6% above 2019 this spring. A by-product of heavier dressed weights is more 50/50 trimmings, which requires more lean trimmings for blending to make ground beef at a target lean content. This has likely resulted in higher processor demand for slaughter cows, which might contribute to higher beef cull cow prices coupled with lower dairy cattle slaughter in 2020. Drought conditions and the impacts of COVID-19 on cattle prices are likely supply-side contributors.

 

To conclude, it will be interesting to see what the January cattle inventory report reveals about the beef cow herd.