Has the Cull Cow Market Reached Its Bottom for the Year Yet? Maybe, But It is Difficult to Say
Oklahoma Farm Report
03 Dec 2018
Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel takes a look at the difficulty the cull cow market is having lately at finding a bottom and the reasons behind it.
"The cull cow market likely reached a seasonal low in November but it has been difficult to understand this market this year. Prices for Breaker cows in Oklahoma City averaged $50.13/cwt. in November, nearly 11 percent lower year over year, while Boning cows averaged $47.88/cwt., over 16 percent down from one year ago. Cull cow prices have been counter-seasonally lower year over year from May through October and have averaged 13-15 percent lower year over year for the last seven months.
"Cull cow prices typically begin a slight recovery in December following the November seasonal low. Cull prices average a much stronger seasonal increase after January 1, increasing by 6.7 percent in January from the November low; with February up 16.2 percent; March up 18.75 percent; April up 19.6 percent and May up 21.1 percent all from the November low. From current levels, this would suggest breaking cow prices of $53.47/cwt. in January; $58.26/cwt in February; $59.53/cwt. in March; $59.94 by April and $60.85/cwt. by May.
"The question is whether the normal seasonal price increase can be expected given how weak the cull cow market has been since May of this year. One of the big factors contributing to weak cull cow prices has been weak cow boxed beef prices in the second half of 2018. In the last week of November, cow boxed beef prices were 7.8 percent lower than year earlier levels and have averaged 8.3 percent lower year over year since mid-year.
"Increased supplies of cow beef is no doubt part of the cause for lower cow beef (and cull cow) prices. Total cow slaughter is projected to be up 7.2 percent in 2018 over last year, with a projected 9.6 percent year over year increase in beef cow slaughter and 4.9 percent increase in dairy cow slaughter. This is higher than the 2017 year over year increase of 6.3 percent in total cow slaughter. Total cow slaughter in 2019 is forecast to be flat to slightly lower year over year and should reduce the supply pressure a bit following three years of increasing cow slaughter. Beef imports, the bulk of which are processing beef that compete with cow beef, have been flat in 2018 and are forecast to decrease 3-5 percent in 2019.
"While overall beef demand has been strong in 2018, the demand for cow beef is more uncertain...