Market Outlook
Cull cow decisions for fall 2024By Elliott Dennis and Aaron Berger
In recent months, there’s been a lot of focus on strong beef demand and the potential for continued high beef and feeder cattle prices into 2025. As fall begins, pregnancy checking for spring-calving cows is in full swing.
A common question I’m hearing from producers is: What should I do with open cows? Should I sell them now to take advantage of the current cull market, retain them and sell later, or re-breed them for fall calving with hopes of selling as a bred cow in the spring or calving them and getting even higher calf prices?
Market trends to considerWith these questions in mind, let’s consider some current market trends that may influence decisions on selling, retaining, or re-breeding open cows:
The number of cows in drought is at one of the lowest levels in five years, though conditions have worsened this fall.
There’s a 70-85% chance of a La Niña event between September and February, which could mean wetter conditions for the Northwest and drier conditions for the southern and northern Plains.
Beef cow slaughter is down 16% from last year.
Beef replacement heifers as a percentage of all heifers stand at 35%, with herd expansion typically happening at 40%.
The Federal Reserve recently cut the Federal Funds rate by 0.5%, citing lower inflation and a strong labor market.
Inflation is currently 2.5% year-over-year, but prices are 22% higher than they were in January 2020.
Feed costs are down due to strong hay yields and lower corn prices.
U.S. retail beef demand in August 2024 was about 5% stronger than the same time last year.
Selling open cows in the current marketCutter cow prices are currently around $110 per cwt. Using a 1,200 lb. open cow, that gives her a market value of $1,320. For a cow that has produced an average of 4.5 calves, today’s prices will almost guarantee she has paid for herself over her productive life. A cow’s market value today at current weigh-up prices is close to the cost for the cow when she entered the herd as a bred heifer. In contrast, producers who bought cows in 2015—at the height of the last cattle cycle— likely ended up selling most of them for a price somewhere near $55 per cwt. when they left the herd. The decision whether to sell open cows now or later depends largely on individual risk preferences.
Retaining open cows and selling laterAlternatively, open cows can be retained and fed for a few months to improve their quality grade. Quality grade is based largely on the amount of lean beef on the carcass. Lean cows, with 85-90% lean content, generally fetch lower prices, while Breaker cows (75-80% lean) tend to sell for about 12% more, and Boner cows (80-85% lean) sell for around 10% more than Lean cows.
Feeding cows to improve quality grade, add weight, and time sales with seasonal price increases can boost profits. Over the past three years, feeding cows for a few months has netted producers an extra $50 per head. Given today’s high cutter cow prices, the net benefit of holding and feeding open cows could be double that this year.
While selling immediately provides quick revenue, there’s a broader consideration. On average, a cow needs to produce 4.5 calves to cover her cost, though this can vary greatly based on calf prices and purchase costs. With current bred cow prices near $2,800 and 550 lb. steers fetching about $1,800, fewer calves may be needed to pay off a bred cow, potentially just 2.5 to 3.5 calves over the next few years should the beef cow inventory continue to decline, and prices stay strong. Taking income now from weigh-up cows and replacing them with bred cows may be an attractive option. Especially if feed, labor and equipment in an operation are not being fully utilized.
Shifting beef cutout dynamicsA key factor in today’s market is the changing beef cutout dynamics. The USDA beef cutout is a price-weighted calculation of the value of USDA Choice, Select, and Cutter Cow carcasses. Historically, USDA Choice carcasses have commanded a 25% premium over Cutter Cow carcasses, and Select carcasses averaged an 18% premium (see Figure 1).
However, as of September 2024, these premiums have shrunk significantly, with Choice commanding just a 6.3% premium over Cutter, and Select a mere 2.2%. The last time premiums were this low was in 2014-2015, though the current situation has persisted for months. This sustained narrowing of the premium may signal a shift, with the possibility that cull cow carcasses could soon be worth as much, or even more, than finished steers or heifers!
Cutout value and ground beefThe driving force behind this narrowing spread is an exceptionally strong demand for ground beef, which is made from a 5:1 blend of 50% lean beef trimmings from fed cattle and 90% lean trimmings from cull cows. As of July 2024, the wholesale price of 90% lean beef trimmings reached $372.01 per cwt, a 45% increase since the start of the year. The current demand for lean beef is reducing the premiums for Choice carcasses, signaling market incentives for producers to focus on producing more lean beef. Ground beef remains the most popular option for consumers, especially as retail meat prices rise. The big question is whether this strong demand for ground beef will continue through the fall, and whether consumers will continue to pay higher prices.
ConclusionAs fall progresses, producers face important decisions about herd management, market timing, and long-term strategy. Current market conditions—high beef prices, strong ground beef demand, and shifting cutout dynamics—will shape profitability over the next few years. Whether to sell, retain, or re-breed cows will depend on each producer’s view of the market, cost of production and operational goals.
Dennis is an associate professor and livestock economist, and Berger, is a beef Extension educator, both with University of Nebraska – Lincoln.
