Feed Market Outlook: Tight Cattle Supply Continues to Hold Cull Cow Prices

Jason Hartschuh, Extension Field Specialist, Dairy Management and Precision Livestock, Ohio State University Extension and Dr. Seungki Lee, Assistant Professor, Department of Agricultural, Environmental and Development Economics, The Ohio State University

Feeder Cattle Price Reached an All-Time High in September 2023

The feeder cattle price is at a historic high, and the price rally is expected to continue through 2024 because of the tight supply. Figure 1 illustrates the recent cash future prices of several livestock commodities and the Bloomberg (Bberg) index. Clearly, the cattle-related prices show a remarkable increasing trend, compared with hogs and the general ag commodity index (i.e., Bberg AG Commodity). In this article, we will look over the current cattle stocks, which is the reason for the current strong cattle price and the feed market outlook.

Low Cattle Stock is the Factor

On September 22, 2023, USDA released a new “Cattle on Feed” report, presenting that the current inventory is 2% below where we were in the previous year (Figure 2). According to the report, during August, placements in feedlots totaled 2 million and marketings of fed totaled 1.88 million head, which is, respectively, 5% and 6% below 2022.

Feed Market Outlook – Moderate Demand Increase Expected, but Local Issues Matter

Major commodities for feed are useful references to check the feed market outlook. Table 1 shows a snapshot of feed-related grains on the USDA’s September WASDE report. Because of the larger corn acreage, USDA forecast a 9.7% higher corn supply in the 2023/24 market. In contrast, the soybean supply is forecasted at 3.4% less than the previous year due to the smaller acreage. Interestingly, while the soybean production is expected to be smaller, the soybean meal supply is forecasted to be 2.7% bigger in the 2023/24 market. This prediction is grounded on the rebalancing between the domestic use and exports of soybeans. In the report, USDA projected the US soybean export would be 1.79 billion bushels in 2023/24, which is about 10% down from the previous year. As shown in Table 1, the soybean meal export is forecasted to be higher by 4.9% in 2023/24. So, we can understand the increased consumption forecast for soybean meal is attributed to the higher domestic demand for soybean oil and lower foreign demand for beans. In fact, USDA predicted the biofuel use of soybean oil would be 12.5 million pounds, which is 5.9% greater than last year. When looking at the feed and residual use, corn is forecasted to be increased by 3.7% in 2023/24, but wheat is forecasted to be the same as the previous year. Thus, overall, the feed-related demand is expected to be moderately greater in 2023/24.

Since the commodity prices are projected to be lowered by and large in 2023/24, buyers will try to lock in at attractive prices, whereas sellers will try to sell when prices are high. As we move through the harvest season, sooner or later, we are going to see the final picture of grain supply, which will help with a better understanding of the supply side move in the feed market.

For Ohio farmers, it can be useful to see the Ohio hay prices in relation to the national hay prices and soybean meal prices. Figure 3 displays the price trends of hay and soybean meal, where hay prices are presented in three ways: 1) all hay products, 2) hays except for alfalfa, and 3) alfalfa only. As depicted in Figure 3, the national hay prices are largely correlated with soybean meal price, alluding to a substitute relationship. Specifically, we can see that alfalfa is the major factor of the high correlation. However, Ohio hay prices are clearly less correlated with the national price trends, which is not surprising because the majority of transactions of feed grain happen in the Western Corn Belt Plains.  Ohio’s hay market is unique compared to the national market with much of the hay going through the market being used by small load buyers who won’t substitute hay for other protein sources. With a potentially large soybean meal supply, producers will need to watch the hay cost to soybean meal balance next year. Therefore, local market circumstances will be much more critical for Ohio growers, although the macro-level feed market moves will still need to be factored.  

Table 1. Feed-related commodities snapshot in the U.S.

(Source: USDA World Agricultural Supply and Demand Estimates)

Figure 1. Daily futures price trends.
(Source: Barchart CmdtyView, accessed on September 26, 2023)

Figure 2. Cattle on feed inventory on 1,000+ capacity feedlots in the US.

(Source: USDA NASS)

Figure 3. Hay prices and soybean meal cash (CBOT) trend.
(Source: USDA NASS and Barchart CmdtyView)