Economic Tidbits

Agriculture’s Shining Star

Record feeder cattle prices are the shining star for Nebraska agriculture this year. According to the USDA Agricultural Marketing Service, the price for 500-600 lb. steers in early June was just above $352.16 per cwt., well above the $300.00 received last year at this time. Prices this year have shattered previous highs recorded in June 2015 (Figure 1). Reasons for the record prices? A prominent one is fewer cattle. Nebraska’s beef cow herd totaled 1.64 million head on January 1, off 4 percent from 2023. One must go back to 1963 to find a smaller cow inventory. The herd is down 17 percent, or over 300,000 head, since hitting the most recent peak in 2019. Nebraska isn’t the only state to see herds shrink. Most major cattle states have also seen their cow herds dwindle. Drought, reduced feedstuff supplies, and increased costs forced many cow-calf producers to liquidate part of their herds. A smaller herd means a reduced supply of calves leading to higher prices.

At the same time, producers are seeing lower costs for feedstuffs this year. Prices for alfalfa, corn, and distillers’ grains are down, while prices for hay remain unchanged. Expenses such as labor or interest costs, though, continue to move higher. Still, cattle prices this year offer the opportunity for positive returns. Plugging current feeder cattle prices into a UNL livestock budget (released last fall) results in a positive return of several hundred dollars per cow. A similar exercise using a budget developed at Kansas State University gives a comparable result. And it looks like positive returns could continue into 2025 and maybe even 2026.

FIGURE 1. MONTHLY AVERAGE NEBRASKA CATTLE PRICES, 2011-2024

Source: USDA AMS data compiled by Livestock Market Information Center. Fed cattle prices are negotiated price averages for steers across all grades. Feeder cattle prices are for steer calves weighing 500-600 lbs.

Meanwhile, prices for fed cattle, while in record territory from a historical perspective, have traded largely sideways over the past year. The average fed cattle price in early June was $190.55 per cwt. compared to $190.32 a year ago. But the relatively high prices are not resulting in profitable returns. Glynn Tonsor, agricultural economist with Kansas State University, expects negative returns for cattle feeding in Kansas feedlots for the year assuming a cash market situation without price risk management strategies being implemented (Figure 2). Higher feeder cattle prices, higher finishing costs, and stagnating prices factor into the troublesome returns.

Presently, the cow-calf sector is the bright star in the constellation of Nebraska agriculture. Today’s conditions are the latest example of the ebb and flow of Nebraska agriculture between the livestock and crop sectors. Hopefully, the positive returns in the cow-calf sector can mitigate the financial struggles currently being experienced by the crop and feedlot sectors.

FIGURE 2. AVERAGE NET RETURNS FOR FINISHING STEERS IN KANSAS FEEDLOTS

Source: Glynn Tonsor, Kansas State University, Dept. of Agricultural Economics, May 2024.

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