April 10, 2003

 

Market Advisor: Cow Marketing May Increase Returns

By Tim Petry, Livestock Economist
NDSU Extension Service

Calving activities are in full swing in the Northern Plains, with cow-calf producers looking forward to a new marketing year. Now is a good time for producers to look for ways to improve profits from the cow herd. One often overlooked activity that may boost returns is the marketing of cull cows. Several readers have requested information on this subject. Thank you for asking. Suggestions are always appreciated and encouraged.

Cull cows are an important source of revenue for cow-calf producers. Proceeds from selling cows can range from 15 to 20 percent of annual income from the cow herd depending on culling rates, cow weights, marketing time, and prices.

Cow prices exhibit a very strong seasonal pattern. Prices for USDA Utility grade cows in the Northern Plains usually begin in January at the average for the year. Prices then increase to above average levels into February and continue increasing with peak levels occurring in March and April at about 5 percent above the annual average.

Prices then decline but are still above average into August when they are near the average again. Below average prices occur in September, with sharply lower prices evident through October and November when prices are at the lowest levels of the year. Seasonal lows in November may average 12 percent below the annual average. Prices begin to recover in December, but are still below the average.

This seasonal price pattern occurs because of seasonal variation in cow slaughter. Cow slaughter is relatively low in March and April when many beef cows are calving. High slaughter levels occur in October and November when cattle are taken off summer pastures, calves are weaned, and cows are culled.

The seasonal price pattern for Utility grade cows was quite evident in 2002, with prices in the mid to upper $40 per hundredweight in the spring. Prices fell to the low to mid $30 range in November. Seasonally higher utility cow prices in the low 40's are now occurring in spite of relatively heavy cow slaughter levels. Dairy cow slaughter is much higher than last year due to low milk prices. Beef cow slaughter is up as well due to extremely dry weather conditions in the Northern Plains and Western producing states.

How can producers take advantage of the seasonal price pattern for beef cows? Obviously, selling cows that have just given birth to a healthy calf in March and April does not make sense. However, cows that lose calves in the spring should be marketed as soon as possible. A $10 per hundredweight decline in prices into the traditional fall marketing time frame is not uncommon. Furthermore, dry conditions that have been occurring in the Northern Plains may necessitate reducing the number of cows maintained anyway.

Marketing of fall-calving cows fits into the seasonal price pattern quite well. Selling of cull cows would occur during the normal Spring highs in prices.

Producers may identify spring-calving cows that have healthy calves but are due to be culled because of age, calving difficulties, or a variety of other reasons. Consideration should be given to marketing these cows earlier than the traditional October/November time period when prices are at seasonal low levels. The steepest decline in prices usually occurs after Sept. 1, so that might be a date to consider. Dry conditions may also warrant reducing grazing pressure on pastures at that time.

It is a good idea to visit with a local livestock auction market manager when considering marketing cows at non-traditional times. Most managers are in contact with cow buyers on a weekly basis and may be aware of good market opportunities. For example, cow prices sometimes get a spark a couple weeks before major hamburger grilling holidays such as Father’s Day, July 4, and Labor Day occur.

Producers with open cows after they are pregnancy checked in the fall may consider retaining ownership for several months. Not only will price levels likely be higher, but the quality value of the cow may be enhanced as well. Of course, feed availability and costs must be taken into consideration.

On a longer term cyclical basis, cow prices will likely increase in the next several years. Drought conditions in much of the cattle producing area of the United States has caused seven straight years of lower cow numbers. Beef cow numbers are over two million head less in 2003 than in 1996. Moisture conditions are back to normal in the Southeast and Southern Plains cattle producing areas so less culling will take place there. Dry weather in the cattle producing regions of Western Canada and Australia has caused reduced cow numbers in those countries as well.

###

Source: Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu