Cattle herd rebuilding could begin quickly if profit potential sends cow/calf producers into the bred cow and heifer market, said Elliott Dennis, Extension livestock economist at the University of Nebraska – Lincoln, in a Livestock Marketing Information Center newsletter called In The Cattle Markets.
The USDA Cattle report showed a 4% reduction in beef cows, a 6% decrease in retained heifers and a 5% reduction in heifers expected to calve this year, Elliot said. Higher prices for feeder cattle were expected after the report, but higher feed costs, especially hay, and other inputs, could limit profit potential.
THE WEATHER FACTOR
Some producers have already run out of hay, and persistent drought shortened the grazing season and reduced overall hay production, he said.
If the ENSO weather pattern changes, it will benefit the Southern Plains with a cool, wet spring/summer, Elliott said. The Northern Plains would stay generally dry in the summer before a cool/wet fall, making it tougher before feed availability improves.
But for producers who have feed resources and believe profits are to be had in 2023 and 2024, the quickest way to gain feeder cattle to sell is through the addition of bred cows or bred heifers, he said. Currently, bred heifers receive about a 2.5% premium over bred cows because of the longer useful life of the cow but smaller than expected because of potential issues with calving that can happen with first-calf heifers.
However, the national bred cow price masks several factors that affect price, Elliott said. Age, weight, months bred, genetics and market conditions are the primary drivers.
One study using Oklahoma City bred heifer and bred cow sales from 2000-15 estimated the premiums and discounts for each of these factors in the bred cow market, he said. To summarize, a three-year-old bred cow that is six-months pregnant, medium/large 1-2 and black could go for about $1,150, currently, up from $870 over the last three years.
Older cows could be discounted of as much as 20% as cows age from that through about 10 years of age, Elliott said.
Similarly, the closer the cow is to calving, the more expensive she becomes, he said, because there less risk of losing a calf as age increases, there are lower production costs before the calf’s birth, and revenue is received more quickly.
Also, bred cows in late winter or early spring will command a premium, as many producers are purchasing cows that are on the same calving cycle in anticipation of summer grass and pastures, Elliott said. Prices are lowest in the summer and fall as producers are culling their herds.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $159.00 to $161.05 per cwt, compared with last week’s range of $156.00 to $159.91. FOB dressed steers, and heifers went for $249.44 to $253.54 per cwt, versus $244.52 to $252.19.
The USDA choice cutout Wednesday was up $3.61 per cwt at $275.67 while select was up $2.41 at $261.19. The choice/select spread widened to $14.48 from $13.28 with 80 loads of fabricated product and 21 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 $1.50 to $1.70 a bushel over the Mar corn contract. Bids in Kansas were steady at $0.75 over Mar, which settled at $6.76 1/4 a bushel, down $0.06.
No live cattle contracts were tendered for delivery on Wednesday.
The CME Feeder Cattle Index for the seven days ended Monday was $183.07 per cwt, up $0.01. This compares with Wednesday’s Mar contract settlement of $187.32 per cwt, up $0.67.