In case anyone was wondering why the January USDA Cattle on Feed report showed a bias in feedlot placement weights toward heavier calves and feeder cattle, the price difference may have had a lot to do with it.
Data from the USDA’s Agricultural Marketing Service compiled and graphed by the Livestock Marketing Information Center in Denver showed the price difference between 500- to 600-pound steer calves and 700- to 800-pound feeder steers all last year was higher than the previous five-year average.
THE BIAS IS REAL
A Central Plains feedlot manager said the price difference between lighter-weight steer calves and the heavier-weight feeder steers was enough to make feedlot buyers seek out the heavier steers if they were available.
He warned, also, that the price spread between lighter and heavier feedlot replacement cattle could widen further once the Mexican border reopens to feeder calves from there. He agreed with some cattle market analysts who have said the backed-up supply of Mexican feeder cattle will stream north across the border once the USDA’s Animal and Plant Health Inspection Service is satisfied that the New World Screwworm situation is in hand.
The border was closed Nov. 22 because of the discovery of New World Screwworm in cattle there. It was supposed to reopen in January, but APHIS wasn’t happy with the progress of eradication measures in Mexico. The latest reports say it could reopen “soon.”
Last week, the USDA average price difference between the steer calves and feeder steers was $73.74, according to the LMIC. This was up $4.61, or 6.67%, from $69.13 a week earlier, up $8.60, or 13.2%, from $65.14 a year earlier and up $40.98, or 125.1%, from the 2019-2023 average of $32.76.
PLACEMENT DECLINE IN SOUTHERN PLAINS
Besides showing a placement bias toward heavier feeder cattle, the last Cattle on Feed report showed a dip in feedlot placements in the Southern Plains. This is where the larger share of Mexican feeder cattle find their final homes.
Once those feeder cattle are allowed to cross into the US, the influx of heavier feeder cattle will pressure prices for those weight categories and widen the price difference between light- and heavy-weight feedlot replacement animals, the feedlot manager said.
The price pressure on feeder cattle markets from Mexican imports also could be felt more in the Southern Plains as Texas was one of the states with the largest year-over-year calf crop increase in 2024. In fact, USDA numbers indicate total feeder cattle supplies outside of feedlots is greatest in all of the Plains states except North Dakota, along with the western Corn Belt and California.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $207.02 per cwt to $207.20, compared with last week’s range of $204.48 to $210.94 per cwt. FOB dressed steers, and heifers went for $326.32 per cwt to $326.89, compared with $320.86 to $336.40.
The USDA choice cutout Monday was up $1.63 per cwt at $323.50 while select was up $1.02 at $313.92. The choice/select spread widened to $9.58 from $8.97 with 59 loads of fabricated product and 24 loads of trimmings and grinds sold into the spot market.
The USDA-listed weighted average wholesale price for fresh 90% lean beef was $368.47 per cwt, and 50% beef was $114.61.
The USDA said basis bids for corn from feeders in the Southern Plains were down $0.01 to $0.04 at $1.1721 to $1.30 a bushel over the Mar corn contract, which settled at $4.91 1/2, up $0.04.
The CME Feeder Cattle Index for the seven days ended Friday was $275.76 per cwt, up $0.17. This compares with Monday’s Mar contract settlement of $268.12, up $3.22.