Southern Plains feeder and stocker steer prices are higher than might be expected for this time of year, and they may be influencing herd rebuilding decisions.
Every producer is different, though, a market analyst said. Conditions and costs will vary, as will the cost of money, which is going up.
With the end of La Nina in the equatorial Pacific Ocean, rains are returning to the Plains states and the Midwest, reviving pastures. Some western states also received heavier snow depths this winter than in several previous years.
And, consumers continue to show strong interest in choice beef, despite rising inflation that is pinching their pocketbooks. So, with feedlot supplies diminishing after years of herd cuts linked to poor profits and pastures, fed cattle prices are rising, piquing feedlot managers’ interest in more feeder cattle.
Current feeder cattle prices are showing the optimism from the feedlots, but this, in turn, may hamper herd rebuilding herd rebuilding.
LOST OPPORTUNITY COST
Seems counterintuitive, to say that higher prices for the finished product will hurt efforts to produce more of the finished product.
Yet, it can happen. It’s happened before. It’s called lost opportunity cost.
When a cow/calf producer decides to keep a heifer for breeding, he or she is looking at a long-term investment that may not begin to pay out for at least another year. The cow/calf producer also runs the risk that the heifer will die; whereupon, all costs incurred up to that time are lost. Plus, there is the added insult that there is a cost associated with having the rendering company haul away the carcass.
At the point when a producer has to decide to keep or sell a heifer to the feedlots, a high immediate price for the heifer may overrule an unknown longer-term return if she is kept for breeding.
If the decision is made to keep her, the producer has passed up, or lost, the opportunity to get the heifer’s sale price.
CATTLE GAP MAY BE DELAYED
If feeder cattle prices prevail and heifers continue to flow to the feedlots, an expected “hole” in fed cattle availability may be delayed, said Andrew Griffith, University of Tennessee agricultural economist in his newsletter Tennessee Market Highlights.
“It will certainly come, but it may be later than man y expected as it is doubtful very many people are making the decision to retain heifers at this particular moment,” Griffith said.
Fed cattle prices almost certainly could rise this spring as fed cattle numbers dwindle, Griffith said, but it may not reach previous predictions.
In the meantime, volatility is the name of the game, another market analyst said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $164.03 to $165.84 per cwt, compared with last week’s range of $161.55 to $167.74. FOB dressed steers, and heifers went for $259.40 to $261.30 per cwt, versus $258.70 to $266.29.
The USDA choice cutout Tuesday was down $1.10 per cwt at $279.92 while select was off $2.39 at $271.55. The choice/select spread widened to $8.37 from $7.08 with 93 loads of fabricated product and 38 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.60 to $1.70 a bushel over the May corn contract. Bids in Kansas were steady at $0.75 over May, which settled at $6.30 a bushel, down $0.03.
The CME Feeder Cattle Index for the seven days ended Monday was $187.78 per cwt, down $0.23. This compares with Tuesday’s Mar contract settlement of $188.77 per cwt, up $0.57.