Cattle Feeders Face Bottom Line Pinch: Peel

The USDA’s National Agricultural Statistics Service’s Quarterly Stocks report and its Prospective Plantings report had significant implications for cattle feeders, said Oklahoma State University Agricultural Economist Derrell Peel.

Peel made his comments in a newsletter to Extension Agents called Cow/Calf Corner.  In the letter, he said the reports indicated that corn stocks were tightening with a less-than-expected chance for recovery from greater production with only a 1% increase in expected acreage.

Soybean acreage likewise was well below expectations at an estimated at 316.164 million acres, up about 6 million from 2020.

Traders were expecting more of last year’s 9 million acres of prevent plant to return to production in 2021, Peel said.




Weekly average cash corn prices last week were reported at $5.85 a bushel in Dodge City, $5.99 in Garden City and $6.01 in the Texas Triangle, up 79% to 82% from the early August low, he said.

Nearby corn futures for May Thursday were $5.79 ¾ a bushel, with Dec at $4.94 ¾.

Current data suggest Southern Plains feedlot cost of gain will continue pushing higher as feedgrain prices rise, Peel said.  The latest Kansas Focus on Feedlots reports February steer closeouts with a cost of gain of $88.61 per cwt, up 16.9% from the October low.  Projected steer COG for current placements is $103 per cwt.

Feedlots will respond in several ways, he said.  They could favor higher placement weights, encouraging forage-based stocker and backgrounding programs.  Or, they could look for opportunities to adjust rations using cheaper ingredients.

Southern Plains winter wheat prices increased in the last eight months but relatively less than corn, Peel said.  Wheat prices in Dodge City, for example, rose about 41%, to about $5.37 a bushel, compared to a corn price of $5.85.

At those prices, wheat becomes more attractive in feedlot rations, Peel said.  In general, a wheat price of 107% of corn is equivalent on a price-per-pound basis (60 pounds of wheat per bushel versus 56 pounds for corn).

Feedlots do not change rations quickly or for short periods of time but will adjust if market conditions suggest that an extended period of alternative feeds is likely, Peel said.  With winter wheat harvest bringing new crop supplies to market in June, prior to new crop corn in the fall, wheat may be adopted.




Fed cattle trading this week was reported in the Plains at $120 to $123 per cwt on a live basis, up $2.50 to $4 from last week.  Dressed-basis trading was at $195 per cwt, up $5 to $11.

The USDA choice cutout Thursday was up $4.19 per cwt at $270.50, while select was up $8.64 at $263.83.  The choice/select spread narrowed to $6.67 from $11.12 with 83 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.

The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were down $0.08 to $0.10 at $1.15 to $1.20 a bushel over the May CBOT futures contract, which settled at $5.79 3/4 a bushel, up $0.19 1/4.

There were no delivery intentions posted against the Apr live cattle futures contract Thursday.  Ten heifer and no steer contracts were retendered for delivery at one.  Nineteen more heifer and seven steer contracts were retendered at 2, and seven steer contracts were demanded at two.

The CME Feeder Cattle Index for the seven days ended Wednesday was not available.  Thursday’s Apr contract settlement was $147.12 per cwt, down $0.50.