Costs for hauling livestock are likely to change in the future as various premiums and discounts are offered to shippers, said Elliott Dennis, Extension livestock economist at the University of Nebraska, Lincoln, in a Livestock Marketing Information Center letter called In The Cattle Markets.
FUEL COSTS CHANGING
Nationally, regular gasoline prices had begun to fade from their all-time highs of $5.01-per-gallon high in June 2022 to a new low of $3.09 in January 2023, Dennis said. Prices have risen steadily over the last several months to $3.57 a gallon in late May.
Diesel has also come down from its high of $5.78 a gallon in June 2022 to $3.85 nationally, he said, putting diesel prices at similar nominal price levels as in 2012-2015.
Diesel is one of the primary inputs in the transportation of livestock, Dennis said. Feeder cattle generally are transported long distances as they move from grazing to backgrounding operations or feedlots.
Cattle, and other livestock, can handle transportation stress fairly well, but trucking feeder cattle long distances can affect animal health, he said. Negative livestock effects can be offset by appropriate stocking densities, proper trailer ventilation, correct animal handling techniques and truck and trailer sanitation.
FED CATTLE IMPLIED PREMIUMS, DISCOUNTS
The trucking pricing mechanisms are assumed to vary by the type of livestock, length of the trip, the load fill, length of the trailer and the season/weather condition, Dennis said. Publicly available bid pricing for livestock hauling has recently ranged from $2.00 to $4.50 per loaded mile but these can vary significantly.
Regardless of marketing method, cattle can be sold live or dressed, and transportation can be either FOB or delivered. FOB indicates the processing plant pays for transportation and assumes the animal risk once loaded at the feedlot.
Delivered indicates the feedlot is required to deliver the cattle to the plant and takes on the transportation risk. The implied trucking cost can then be calculated as Trucking Premium/Discount = Delivered – FOB, he said. Positive numbers indicate that packing plants are willing to pay a premium ($/cwt.) to have cattle delivered. Negative numbers indicate that packing plants want to set up the trucking.
Producers can expect to receive premiums/discounts depending on whether cattle are sold live or dressed, Dennis said. However, on average, since 2010 premiums have been more often positive than negative.
There has also been a slight increase in the trend from 2018-2023 for cattle that are sold live, he said. In the past year there has been a large divergence in the implied hauling rates for live and dressed – live has become more positive, and dressed has become more negative.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $171.68 per cwt to $183.03, compared with last week’s range of $169.74 to $183.99 per cwt. FOB dressed steers, and heifers went for $267.34 per cwt to $279.57, compared with $268.57 to $278.21.
The USDA choice cutout Friday was up $3.49 per cwt at $309.93 while select was up $4.61 at $290.93. The choice/select spread narrowed to $19.00 from $20.12 with 88 loads of fabricated product and 32 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 $1.68 to $1.78 a bushel over the Jul corn contract, which settled at $6.09 a bushel, up $0.16 1/2.
The CME Feeder Cattle Index for the seven days ended Thursday was $208.04 per cwt, down $0.03. This compares with Friday’s Aug contract settlement of $241.90 per cwt, up $0.25.