As the livestock economist for Extension at the University of Tennessee, opportunities to forecast cattle prices are never in short supply. Thus, there is always a demand for high quality and accurate cattle price projections. The primary problem is with the supply side, and the problem is that the price forecast changes from one day to the next and even more so from week-to-week or month-to-month.
Given that this article is often written a couple of weeks before it is published, any and all cattle price projections may be of little use by the time it reaches the mailbox or the inbox. However, cattle prices are not the only factor impacting profitability. It may also be beneficial to discuss the 2019 University of Tennessee Extension beef cattle budget and expected costs.
Given the variability and seasonal trends of cattle prices throughout the year, it is necessary to supply an expected annual average cattle price based on given heifer, steer and slaughter cow weights. Based on the 2019 budget, slaughter cows (1,200 pounds) are expected to average $50 per hundredweight, while 550 pounds steers and 520 heifers are expected to average $145 and $130 per hundredweight respectively. Assuming the calving rate is 90 percent and a 2 percent death loss for cows and calves then the expected revenue per cow exposed to the bull is $623 per cow. Revenue will vary based on weight of animals when sold and the time of year those animals are sold.
Total projected variable expenses in the 2019 cow-calf budget are $556 per cow not including labor and land costs which would leave a producer with a return to variable expenses of $67 per cow. The primary costs are pasture and hay which are estimated at $241 and $168 per cow respectively. Veterinary and medicine costs as well as salt and mineral costs are each estimated at $32 per cow while supplemental feed, interest, and marketing costs make up the remaining variable expenses. It is likely the addition of land rent and labor costs would result in a negative return to variable expenses for most operations.
Fixed expenses such as depreciation, interest, insurance, taxes, and repairs on equipment, buildings, and machinery also need to be considered. However, most producers do not consider costs such as depreciation and interest if they do not experience out of pocket costs in a year. Fixed expenses are highly variable across operations as are variable expenses. Given the 2019 budget estimation, fixed expenses for a 50 cow herd are estimated at $342 per cow resulting in a total cost per cow of $898 resulting in an economic loss of $275 per head.
The costs assumed in the budget are not likely to fit any operation perfectly, but they do provide a starting point. An operation’s cost structure has a greater influence on differences in profitability among producers than do prices received. This means producers should be evaluating methods of trimming costs that do not negatively impact production and thus revenue or trimming costs that have a greater cost saving benefit than the revenue reduction from the practice. For readers who would like to customize a budget, please visit the following website where the Excel version can be downloaded and edited https://ag.tennessee.edu/arec/Pages/budgets.aspx.
2019 Price Projections: Using 500 to 600 pound steers in Tennessee, the first quarter will likely have the highest quarterly average price with prices ranging from $150 to $162 per hundredweight with prices slowly increasing throughout the quarter. The second quarter price range projection is from $147 to $157 per hundredweight with prices slowly softening after April. Prices will come under increased pressure in the third quarter with prices ranging from $142 to $152 with September prices showing a willingness to collapse. Prices in the fourth quarter will continue to struggle in October and November before finding a slight toe hold in December.
Yearling cattle prices are expected to start 2019 off on the soft side which is how they finished 2018. Yearling cattle prices (750-850 lb) are expected to find footing though and be stable throughout the year with the strongest prices in the third quarter ($144 to $154). Prices on either side of the third quarter are expected to be lower, but large price swings are not expected. As a final thought, when all is said and done, a lot more is said than done!
FAQs
Given the 2019 budget estimation, fixed expenses for a 50 cow herd are estimated at $342 per cow resulting in a total cost per cow of $898 resulting in an economic loss of $275 per head.
How profitable is the cattle industry? ›
USDA's Economic Research Service provides annual cow-calf costs and returns estimates for the United States and key production regions. Annual U.S. returns over variable costs in the current cattle cycle have averaged $124 per cow, with a high of $391 per cow in 2014 and a low of $12 per cow in 2022.
How much has the price of cattle increased? ›
Fed cattle prices are raised about $2 from last month to $185.00, about 5 percent above prices in 2023. U.S. beef exports in February were 244 million pounds, almost 3 percent above same-period shipments last year and higher than expectations.
When were cattle prices the highest? ›
Live Cattle increased 5.55 USd/Lbs or 3.30% since the beginning of 2024, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Historically, Live Cattle reached an all time high of 192.05 in September of 2023.
How much profit from 10 cows? ›
The self-evident answer to these questions is “no.” It does not matter if you are milking 200 cows or 2,000 cows, 10 cows is a big deal when looking at the bottom line to your income over feed cost. In this scenario, 10 fewer cows results in $99 per day, $693 per week, $3000 per month in potential lost revenue.
What is the average return on cattle? ›
Feeder to Fed Cattle Price Ratio
The average net return for the months in which the ratio was below one standard deviation of the average was $108 per head. In contrast, the average loss for the months in which the ratio was above one standard deviation was $265 per head.
Is cattle ranching still profitable? ›
Is cattle ranching a profitable business? As others have answered, profitability in cattle ranching depends on a number of factors. If you have enough land to run a big enough herd, you can do alright. But drought years can severely affect profitability.
Will cattle prices stay high in 2024? ›
From a marketing perspective
31, 2024, Cattle Inventory Report, live cattle and feeder cattle futures prices do remain firm to slightly higher. Not leaping higher, not ratcheting higher, not screaming higher, just slightly higher.
Is there money in raising cattle? ›
In all seriousness though, raising beef cattle is an extremely low margin business dependent on multiple commodity markets and large processors. When the cattle market is high it can be profitable but typically the money that is made during those periods goes towards making up for money lost in others.
Why are live cattle prices falling? ›
It's a stressful time in the cattle industry and prices continue to drop as uncertainty lingers. Feeder cattle prices continue to drop which cut the feeder cattle volume way down at auctions when it is normally busy this time of the year because cattle are moving off of wheat pastures.
Cattle Current Weekly Highlights—Week ending April 16, 2021
| Steers-Cash | Apr. 19 | Change |
|---|
| 600-700 lbs. | $166.01 | + $1.26 |
| 700-800 lbs. | $150.19 | – $2.05 |
| 800-900 lbs. | $137.53 | – $5.16 |
Based on the University of Tennessee cow-calf budget, pasture, hay and supplemental feed accounts for nearly 80 percent of the production expenses and over 50 percent of the total cost of production. The remainder of the production expenses is composed of salt and mineral, herd health, reproductive costs, and labor.
At what age is a cow most valuable? ›
In most markets, breeding females actually appreciate in value until about 3 years of age. Typically, females that continue to breed back hold their value relatively well until approximately age 6. From there, a cow generally begins to depreciate rapidly, leveling out at a low value at approximately age 9.
What is the profit margin on a cow? ›
However, in the United States, profit margins for beef cattle production typically range from 10% to 20%, with some operations achieving higher margins through efficient management and value-added strategies.
What is the most profitable animal to raise? ›
What Are the Most Profitable Livestock for Small Farms?
- Chickens. Raising chickens is a great way to start any small farm or homestead. ...
- Goats. ...
- Bees. ...
- Rabbits. ...
- Cattle. ...
- Pigs. ...
- Why raising livestock is good for small farms.
What breed of cattle is most profitable? Angus: This is the most popular breed of beef cattle. Their meat quality is excellent and they provide 50 percent of their weight in the meat. Highland Cattle: Though they are not as popular as they once were, they are still in demand by people who know love their meat.
What is the most profitable breed of cattle? ›
What breed of cattle is most profitable? Angus: This is the most popular breed of beef cattle. Their meat quality is excellent and they provide 50 percent of their weight in the meat. Highland Cattle: Though they are not as popular as they once were, they are still in demand by people who know love their meat.
How much money is made from cattle? ›
Cash receipts for animals and animal products totaled $258.5 billion in calendar year 2022. Cattle/calf receipts accounted for $86.1 billion (33.3 percent) of that total, while poultry and eggs receipts accounted for $77.0 billion (29.8 percent), and dairy receipts accounted for $57.3 billion (22.2 percent).
