Amid rising supplies, feeder cattle prices continue to fade counter-seasonally, but trying to predict a bottom isn’t possible.
Average USDA-reported prices for 700- to 800-pound medium and large No. 1 feeder steers in the Southern Plains last week averaged $123.06 per cwt, down only $0.17, or 0.14%, from $123.23 the previous week. The average price last week also was $73.68, or 37.45%, below last year’s $196.74 and $39.12, or 24.1% below the 2010-2014 average.
Prices crossed below the 2010-2014 average during the third week of May, rose back above the average a week later and finally gave in to the pressure two weeks later. Prices tried to rebound above the average during the first two weeks of August but failed.
Prices are following the 2015 trend more closely than they are the 2010-2014 average. The 2015 trend was noteworthy in its decline from record highs beginning in June.
PRICE PRESSURE IN ALL WEIGHT CLASSES
It is well known from monthly USDA Cattle on Feed reports that feedlot placements have favored the heavier feeder cattle. There are two reasons for this: one, that feedlots prefer these cattle since they will spend less time on feed and provide a quicker turnaround. Heavier placement weights also provide for heavier fed cattle weights when they go to slaughter, which brings greater per-head returns.
The second reason for the heavier placement weights is that cow/calf producers and backgrounders have been able to keep calves on grass for longer periods this year than was possible during the drought years. The calves not only spend more time on grass, but the grass quality is better allowing the young calves to grow rapidly, so that by the time they are sold o feedlots they are naturally larger.
There is debate about which reason is more important, but price comparisons show that prices for 400- to 500-pound calves in the Southern Plains also declined, almost in lockstep with the heavier feeder cattle.
The average price crossed below the five-year average in the third week of June and has remained below the average trend-line ever since. Last week’s average price of $134.37 per cwt was $110.63, or 45.0%, below last year’s $246.00 and $59.98, or 30.7%, below the 2010-2014 average of $195.35.
Trying to pick a bottom to this market is very difficult, but there is anecdotal evidence to suggest it could come next year.
Cow/calf operators appear to be slowing the growth of their herds as the profit potential of each cow declines. Some also may have reached the carrying capacity of their pastures and their winter-time haying abilities.
With less growth in the cow herd comes less growth in the number of calves born each year. Calf producers may begin trimming unprofitable cow herds, tightening calf supplies and supporting prices.
CASH CATTLE MARKETS QUIET
Cash cattle markets Thursday were quiet with bids at $102 to $104 and asking prices near $105. Cattle traded $5 to $6.50 per cwt higher earlier in the week at $103 to $105. Just 69 have traded in this week’s dressed markets at $160.
The USDA’s choice cutout Thursday was $0.77 per cwt lower at $181.54, while select was up $0.36 at $168.81. The choice/select spread narrowed to $12.73 from $13.86 with 119 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Wednesday was $120.90 per cwt, up $0.95. This compares with Thursday’s Oct settlement of $121.92, down $0.05, and Nov’s $123.87, down $0.05.