The seasonal feeder cattle price slide in the Northern Plains is steep this fall compared with last year, said Matthew Diersen, risk and business management specialist at South Dakota State University’s Ness School of Management, in a letter to Extension agents from the Livestock Marketing Information Center called In The Cattle Markets.
This is the time of year with the largest feeder sales in the Northern Plains, leading to the familiar price slide, where lighter weight animals are priced at a premium to heavier weights on a per cwt basis, Diersen said.
HIGH FEED COSTS NOT THE WHOLE STORY
One factor affecting the slide is the cost of feed, he said. The price of corn currently is much higher than a year ago, so the higher cost of gain means the feeder price slide will be more pronounced.
Isolating just the price of corn, however, seems to mask many of the other factors that can affect the slide, Diersen said, and the correlation is low or weak between the price of corn and the slide.
Other factors matter or dominate the influence of any one factor, he added. The price of roughage also would factor prominently, especially for lighter animals.
STEER/HEIFER SPREAD WIDER
The price spread between feeder steers and heifer also is wider this fall than a year ago, Diersen said. Heifers would be discounted to steers of the same weight as they would be expected to have a lower rate of gain and a lower finish weight. The greater the cost of feed (and gain), the wider the spread.
The discount can be reduced (or conceivably eliminated) if there were another reason to value heifers differently, he said. This can happen when heifers are demanded as replacements.
The latter part of 2021 never brought improved range and pasture conditions for the western US, Diersen said. The reduced feed supplies would be partly responsible for the steeper price slide observed now.
The heifer mix in October was back up to almost 40% of cattle on feed from about 39% last year. The supply of feeder cattle outside of feedlots in October was lower than in 2020 and 2019.
Tough pasture conditions could be driving cattle to feedlots sooner, which may partially explain the higher October placements, he said, but continued higher placements mean the supply of feeders outside of feedlots is getting smaller, which would be supportive of prices for feeders in the short run.
And, larger placements likely means the heifer mix is not getting smaller, Diersen said. This will keep the spread wide going forward until the pasture, feed and returns situation changes.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers last week ranged from $131.81 to $135.75 per cwt, compared with the previous week’s range of $129.52 to $132.00. FOB dressed steers and heifers went for $205.64 to $209.84 per cwt, versus $197.79 to $203.85.
The USDA choice cutout Wednesday was up $0.47 per cwt at $279.11, while select was up $0.80 at $263.47. The choice/select spread narrowed to $15.64 from $15.97 with 109 loads of fabricated product and 20 loads of trimmings and grinds sold into the spot market.
The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.35 to $1.45 a bushel over the Dec futures and for southwest Kansas were unchanged at $0.40 over Dec, which settled at $5.79 3/4 a bushel, down $0.00 3/4.
The CME Feeder Cattle Index for the seven days ended Tuesday was $157.83 per cwt up $0.40. This compares with Wednesday’s Jan contract settlement of $166.92 per cwt, up $2.55.