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In-depth look at COVID-19’s effect on beef market

Opportunities exist for value-added beef lots as well as the cull cow market.

The price of 500-pound steer calves has been erratic since last October. This has been the case across the U.S., with uncertain weather, trade policies and financial markets all playing a role.

While prices for the 2019-20 marketing season in New York have been about $13 per cwt lower than the 2018-19 calf marketing season, prices are following seasonal trends. Prices are typically lowest in the fall and increase as we get closer to grass

Fall feeder prices

It’s difficult to predict this fall’s price for calves. Currently, October feeder cattle futures are down about 30 cents since the high in mid-January. Most of the declines are related to the crash of the stock market.

The fundamentals of the commodity markets (futures) are expected to bring the market back. The demand for beef is strong. A good example is the increased value of cull dairy cows as people are forced to eat in and hamburger is the meat of choice due to its preparation flexibility.

The risk of running stocker cattle this year, because of the unknowns, is high. For those with experience producing cheap gains on pasture and who are wise in purchasing calves, this may be a risk worth taking.

Premium for adding value

Adding value to feeder cattle means matching your product to what the market wants. Preconditioned, weaned and large load sizes can make a difference. Miss any of these points and you won’t see the full value.

The table below shows the price of cattle managed in two different ways.

Management of value-added feeder calves is compared to those managed differently in New York during December 2019

The second group were vaccinated, but they may or may not have been weaned, bunk and water tank broke, and were from a variety of sellers; therefore, they were difficult to develop a reputation with buyers.The value-added cattle were from one producer. They had a strict health management protocol, were weaned, bunk and water tank broke, and had an earned reputation with buyers.

The lot size of both types were 18 head each and average weight difference was less than 7 pounds.

The data is irrefutable. As a producer, you need to decide what practices you will implement and if it’s worth the cost to get this premium.

Cull cows benefiting

Due to COVID-19, beef demand has shifted from restaurants to grocery stores as consumers have stocked up. The most versatile item to freeze is ground beef. This has resulted in a large increase in the price of boner and lean cows, which supply most of the ground beef.

Take a look at the graph and you’ll see the price trend since January.

Chart shows the increasing price of boner and lean cows January through March 2019 due to grocery demand

While prices have been increasing seasonally from the first of the year, the price saw a modest increase in March, and that is expected to continue.

Feedlots hurting

The segment of the industry that has been hurt the most from COVID-19 are the feedlots. Generally, there is a seasonal increase in price as we move into the grilling season.

This year, due to the steep drop in the stock market, there was an overreaction in the fed cattle bid. This seems to be correcting as the price has begun to recover in the cash and futures markets.

Baker is a senior Extension associate with Cornell Cooperative Extension.
TAGS: Marketing
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