While concentrated in a few states, US cow/calf production is spread out across the country providing regional differences in feeder cattle prices.
In general, those differences tend to reflect distance away from the middle of the contiguous 48 states where the cattle are fed for slaughter.
REGIONS
Data from USDA’s National Agricultural Statistics Service show the five largest beef cow states have 39.1% of the total beef cow herd, but 18 states have at least 2% of the total inventory. As a result, states with smaller hoof prints in the industry can’t be ignored.
In addition to the leading cow/calf states, the top five cattle feeding states have 71.9% of total cattle on feed.
Unlike many other countries, the US’ infrastructure allows cattle to change hands before entering a beef packing plant for their date with destiny. Sometimes, cattle can change hands four or five times before they are finished for slaughter.
As a side note, this makes tracking US cattle more difficult than in many other countries where the cattle may never change hands before going to an abattoir.
PRICES REFLECT LOCAL CONDITIONS
Oklahoma State University Extension livestock marketing specialist Derrell Peel wrote in a newsletter that feeder cattle prices around the country reflect local supply and demand conditions and the cost of moving cattle to feedlots in the middle of the country.
State average prices for 500-pound medium and large No. 1 steers for the first three weeks of April illustrate the typical pattern of prices across the US, Peel said. Prices range from a high of $410.01 per cwt in Nebraska to a low of $362.66 per cwt. in Mississippi, a spread of 11.5% from high to low.
It is generally true that the highest feeder cattle prices will be in Nebraska with prices declining in all directions away from there, he said.
The pattern for bigger feeder cattle is similar, Peel said. Prices ranged from the Nebraska high of $315.05 per cwt, to the Mississippi low of $256.81 per cwt.
The spread from high to low was 18.5%. Most of the regional price differences were explained by the transportation costs to cattle feeding areas with the discounts bigger for heavy feeder cattle, which cost more on a per-head basis to ship, Peel said.
Feeder cattle markets reflect the economic principle of the “law of one price,” he said. This concept states that prices are equivalent when adjusted for differences in time, place and form. Feeder cattle prices differ according to location, weight and other factors but reflect this underlying equilibrium.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $212.26 per cwt to $216.02, compared with last week’s range of $207.38 to $214.72 per cwt. FOB dressed steers, and heifers went for $329.37 per cwt to $339.02, compared with $321.91 to $336.58.
The USDA choice cutout Wednesday was down $2.95 per cwt at $345.31 while select was down $1.80 at $322.02. The choice/select spread narrowed to $23.29 from $24.44 with 68 loads of fabricated product and 31 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $374.71 per cwt, and 50% beef was $107.83.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.18 to $1.30 a bushel over the May corn contract, which settled at $4.67 1/4, up $0.06 3/4.
No live cattle were tendered for delivery Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $295.77 per cwt, up $0.63. This compares with Wednesday’s May contract settlement of $292.57, down $1.45.