Most of us who don’t raise livestock rarely follow what trends are developing in the livestock sector. However, if you are one of those lucky consumers who happens to have freezer space then following the market trends can be a money saver. Let’s see where livestock is headed and maybe you can cash in before a market increase.

The 2024 cattle inventory is the lowest it has been since 1951, which has sent beef prices soaring. The hog industry is looking profitable, too, but has a lot of ground to make up for with last year’s losses as well as supply chain complications caused by California’s Proposition 12. Poultry including eggs, broilers and turkeys are continuing to contend with Highly Pathogenic Avian Influenza (HPAI).

Cattle

USDA estimated in its January Cattle Inventory that all cattle and calves in the United States were 87.2 million, the lowest since 1951. The country’s cattle producers, facing stress from multiple years of drought and high supply costs, have been marketing a lot of cows and heifers since 2020, so fewer of these female cattle are available to produce calves. USDA’s July Cattle Inventory previously provided a breakdown of the U.S. cattle inventory including the calf crop for the first half of the year. Without this report in 2024, it is much more difficult to estimate what cattle supplies look like for the remainder of the year.

Feedlot inventories are slowly reflecting the lower cattle inventory. In its July Cattle on Feed report, USDA estimated all cattle and calves on feed in the United States was 11.3 million on July 1, up one percent from a year ago. Heifers and heifer calves accounted for 4.48 million head. While this is up only slightly, this is near the record-high number of heifers and heifer calves for the July 1 report and makes up about 40% of the overall cattle on feed. Historically, heifers make up around 32% of the overall cattle on feed. This is a strong indicator that farmers are still not withholding heifers to rebuild the U.S. cattle herd.

One particularly important metric the July Cattle Inventory would have provided is the size of the calf crop for the first half of the year. This is the time when most of the U.S. calf crop is born. It takes about a year for a heifer calf to reach maturity for breeding. These calves that could be replacements will not reach breeding age until 2025. The first opportunity for herd expansion will be possible if farmers begin to withhold heifers from this year’s calves for breeding in 2025. This means the arrival of the 2026 calf crop will be the first opportunity on the horizon to increase the cattle inventory. 

Summer demand has helped push prices up. Choice grade beef has worked its way above $300/cwt. Something that can be helpful in gauging the demand for beef is the difference between choice and select grade beef. A wider difference between choice and select beef often indicates a consumer is willing to pay more for premium cuts of beef where a narrowing difference may show that consumers are more willing to settle for a lower quality cut. The current spread sits at $13.11, which is just below the year-over-year average of $16.08. July average cash fed steer prices have ranged from $188/cwt to $192/cwt. As we approach fall, cattle available for placements on feed should slow down. This should bring higher cash prices at the sale barn, which will drive beef prices higher as well.

Hogs

USDA’s Quarterly Hogs and Pigs report contained some important data relating to the U.S. hog inventory. According to this report, the inventory of all hogs and pigs was 74.5 million head, up one percent from June 2023. The breeding inventory was 6.01 million head, down three percent from last year. Market hogs were 68.5 million head, up 2% from last year.

 The March through May pig crop was 34 million, up two percent from last year, bringing the average pigs saved per litter to 11.56, which is the third-highest average in survey history. When combined with the December through February pig crop and the slightly higher-than-expected weights from lower feed costs, USDA estimates 2024 pork production at 28 billion pounds, about three percent more than 2023. Increased production is bearish news, especially for the cutout, and could bring lower hog prices for farmers in the second half of 2024.

Hog farmers faced devastating average losses of about $31 per head in 2023. Elevated input costs, particularly from feeds and inflated fixed costs, were responsible for losses. Iowa State University’s June 2024 estimate for returns to farrow to finish operations shows a profit of $8.82 per hog, up 133% from -$26.18 in the same time period in 2023. The majority of this difference comes from the 25%, or $31 per head, drop in the cost of feed from June 2023. Despite the much-needed boost from lower feed costs, the cost of fixed inputs such as fuel and utilities remain elevated from inflation.

In its July World Agricultural Supply and Demand Estimates report, USDA estimates the annual U.S. per capita demand for pork is 51 pounds per person.

While current domestic demand is just not enough to bump prices up, export demand has been extremely supportive for hogs. Total pork export sales were 967.2 thousand metric tons, up 6.7% from 2023. Mexico has been an essential trade partner, purchasing 369.1 thousand metric tons year to date, up just slightly from last year but 278% higher than the second-largest importer of U.S. pork, Japan. Hog slaughter is up meaning there is more product available in the short run as products like hams hit their highest prices of the year. Since Mexico has been such a big player in the U.S. ham market, these higher prices may slow export demand from Mexico, ultimately putting downward pressure on prices, especially in the short run.

The latest CME lean hog index has been in an upward trend since early July. The index was $91.85/cwt on July 29, while the national average cash price picked up $1.94, bringing the price to $84.07/cwt. Currently daily slaughter numbers are elevated. Slaughter hog supplies are expected to grow as we move closer to fall and winter months, which may lead to falling cash prices.

Poultry and eggs

USDA adjusted 2024 Broiler production and prices down in its July Livestock, Dairy, and Poultry Outlook. May 2024 broiler production is estimated to be 3.99 billion pounds, down a little over one percent from last year.

Chicken has the highest consumer demand of any meat in the United States. According to USDA’s June WASDE report, per capita demand for broiler meat is 101.6 pounds per person, up 2.1 pounds per person, or 2.1%, from 2023. This increase may be due to higher prices for substitutes such as beef.

In its June Chickens and Eggs report, USDA estimates June egg production at 8.81 billion eggs, down 2% from last year. The number of layers in June 2024 was 371 million, down 3%, while egg production per 100 layers was up one percent.

Egg sets (eggs placed in incubators) are important for ensuring a healthy supply of hatching eggs. When farmers are faced with a decrease in egg hatchability or an expected reduction in production, they begin setting more eggs to achieve the desired number of chicks for placement, which happens about three weeks after hatching. Egg sets peaked in April at 5.4% above the five-year average. Three weeks later in May, chicks placed were four percent above the five-year average. Egg sets in July were also four percent above the year-over-year average while chick placements were up only .7%.

Table egg layers have suffered from HPAI outbreaks. There were zero HPAI detections in table egg flocks in June. However, 5.6 million birds were lost in May. The egg laying flock inventory in June consisted of 305.9 million birds, a loss of less than half a million from May. Based on this data, second quarter USDA forecasts for production were adjusted up 10 million dozen to 1.9 billion dozen eggs.

The average New York June wholesale price for large eggs was $2.58 per dozen (Figure 5). This brings the average second quarter price to $2.27 per dozen, about seven cents, or three percent, above last month’s estimate and about 91 cents, or 70%, above the average second quarter price for 2023. Egg prices are relatively stable for now. However, with the table egg layer inventory as low as it is, any fall outbreaks of HPAI have the potential to drive up prices.

Livestock markets for the second half of 2024 are a mixed bag. Shrinking cattle supplies along with strong beef demand will keep cattle and beef prices strong through 2024 and likely through 2025. Hog producers have had some relief from last year’s losses but still face considerable obstacles to maintaining profitability as production is forecast to increase through the remainder of the year. The poultry industry is facing risks associated with HPAI, adding uncertainty as we soon transition to fall when migratory birds begin their annual trip south.

While profitability in livestock is holding for now, there are still obstacles on the horizon including rising costs of production and a down ag economy.

“I am fond of pigs. Dogs look up to us. Cats look down on us. Pigs treat us as equals.” -Winston Churchill

Ron Kern is the manager of the Ogle County Farm Bureau.