Cattle feeders last year may have set themselves up for what one market analyst called a “death trap” this year.
Feeder cattle prices have had a strong runup since the middle of last year, something that maybe shouldn’t have happened, given the tight margins experienced by the feedlots.
Feedlot competition for available feeder cattle supplies remained strong, even though they were struggling to make ends meet.
The situation “puts a bunch of pressure on the market to do exponentially insane things to get the money back,” the analyst said. “Highest feeders ever combined with highest corn ever at a time a packer can kill slow. Beef will get high, and the guy most likely that will hold the bag is the feeder.”
Additionally, it looks like competition was greatest for the lighter-weight calves, which, if they went directly to feedlots, would be ready for slaughter next month and into the summer. And some really little ones, like Holstein calves, could wait until fall for slaughter, stretching this scenario out even farther for those feedlots.
400- TO 500-POUND PRICES UP
Starting with the first week of July last year, prices for 400- to 500-pound feeder steers rose above the 2016-2020 average and remained higher than the average for the rest of the year, although gains were quite uneven, according to data from the USDA’s Agricultural Marketing Service and compiled and released by the Livestock Marketing Information Center in Denver.
Starting this year, prices for those calves were significantly higher than either last year or the previous five-year average. Last week, for example, the average price for 400- to 500-pound feeder steers was listed by the AMS as $202.63 per cwt, up $22.61, or 12.6%, from $180.02 a year earlier and up $13.87, or 7.35%, from the five-year average of $188.76.
700- TO 800-POUND PRICES ALSO UP
And the situation isn’t confined to the light-weight feeder cattle and their effect on the bottom lines for feedlots.
Prices for 700- to 800-pound feeder steers crossed above the 2016-2020 average the second week of June and never looked back. Prices also were on a general uptrend in contrast to the average, which tends to run sideways within a range from $140 to $150 per cwt.
Many of these calves already are dead, but many remain in feedlots, closing in on their date with destiny.
Prices for these feeder cattle also are starting 2022 at higher levels than last year and the average. Last week’s average was $159.24 per cwt, up $26.44, or 19.9%, from $132.80 a year ago and up $12.47, or 8.50%, from the $146.77 average.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $137.61 to $138.78 per cwt, compared with last week’s range of $139.49 to $141.00. FOB dressed steers and heifers went for $215.12 to $216.31 per cwt, versus $216.27 to $218.77.
The USDA choice cutout Tuesday was up $1.63 per cwt at $289.49, while select was up $1.34 at $278.39. The choice/select spread widened to $11.10 from $10.81 with 85 loads of fabricated product and 39 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.45 to $1.65 a bushel over the Mar futures and for southwest Kansas were unchanged at $0.35 over Mar, which settled at $5.99 1/2 a bushel, up $0.03 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $161.30 per cwt down $0.41. This compares with Tuesday’s Jan contract settlement of $161.45 per cwt, down $1.25.