When fed cattle production costs of various weights in Illinois were compared, there were only small differences in returns, said Bradley Zwilling, agricultural economist at the University of Illinois at Urbana-Champaign, in farmdocdaily.
Looking at different factors involved in fed cattle production (outside of costs to produce but including feed and purchase cost of cattle), there were many differences in average sale weights, average sale prices, value of feed fed and pounds of feed fed, Zwilling said.
However, when those items were combined to calculate returns above feed costs per cwt produced, the differences in the three studied groups was small, he said.
It was ironic that the 500-750 group that had the majority among those enrolled in the Illinois Farm Business Farm Management operations also had the highest returns above feed cost per cwt produced by almost a dollar, Zwelling said.
STUDY BACKGROUND
For his study regarding the differences based on the weight purchased in fed cattle production, Zwelling looked at feeding operations enrolled in Illinois the FBFM over a 20-year period from 2001 to 2020. The operations were separated into three categories based on the average purchase weight of the feeder cattle.
Those groups were less than 500 pounds, 500 pounds to 750 pounds and 750 pounds and greater, he said. On average, the majority of FBFM feeder cattle operations purchase their feeder cattle between 500 pounds and 750 pounds.
The twenty-year average price paid per cwt was the highest for the <500 and 500-to-750-pound groups while the 750+ group paid almost $6 less per cwt, Zwelling said. And, the smaller the animal was when purchased the smaller the animal was when sold.
Average sale weights were true for the last 10-year and five-year averages, he said. When these feeder cattle operations market their cattle, the 500-750 group and 750+ group received the highest average price per cwt.
The <500 group sold their cattle on average about $6 less per cwt when looking at the twenty-year average, Zwelling said. But, when combining those items, even though the <500 group received less dollars per cwt when they sold cattle, the group had the highest gross returns because of lower purchase weights.
RETURNS
Returns above feed costs per cwt produced include the sale price minus the purchase cost as well as the change in inventory value of any cattle still in inventory at year-end, Zwelling said. All three groups tended to follow each other closely except from 2013 to 2015 where the <500 group separated itself from the other two groups.
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 Friday was up $0.90 per cwt at $280.01, while select was off $1.19 at $262.28. The choice/select spread widened to $17.73 from $15.64 with 28 loads of fabricated product and 22 loads of trimmings and grinds sold into the spot market.
The USDA reported Friday 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 $5.86 3/4 a bushel, up $0.07.
The CME Feeder Cattle Index for the seven days ended Wednesday was $157.48 per cwt down $0.35. This compares with Friday’s Jan contract settlement of $167.15 per cwt, up $0.22.