Continued strength in the feeder cattle and slaughter cow markets has been beneficial to producers marketing cattle the past several weeks, said Andrew Griffith, agricultural economist at the University of Tennessee in a letter to Extension agents.
CASH PRICES STRONG
Cash feeder cattle prices are strong, and futures indicate continued strength into 2022, Griffith said. This strength provided support for lighter calves that typically would see prices begin to soften in late summer.
However, based on Tennessee weekly auction averages, 525-pound steers were bringing $155 per cwt, resulting in a value of $814 per head this week, which is about $50 more than the same time a year ago, he said.
On the buying side, that means cattle buyers paid more than they were a year ago for light cattle, Griffith said. However, the higher purchase price does not place these producers in a poor situation given the strength in the futures market.
The expected price of a load of 825-pound steers to be sold in January or February in Tennessee is near $160 per cwt, resulting in a total value of $1,320, Griffith said. This means the value of gain through the end of January is $1.69 a pound if the sale were hedged today.
The price of those animals would have to decline to $135 before the value of gain declined to $1, he said. This also means there is significant value for cow/calf producers to add weight to calves.
SOUTHERN PLAINS ALSO STRONG
Meanwhile, Southern Plains steer calf prices have been robust, the Livestock Marketing Information Center said in a letter to Extension agents.
Calves weighing 500-600 pounds averaged 6% to 16% higher from June through mid-August, the LMIC said. The calf market is incredibly hot given the higher cost of feed.
Reports of droughts and liquidation would have implied early weaning was a given in 2021, but the data has shown little signs that is happening to a large degree, the LMIC said. July placements of calves weighing less than 700 pounds were 15% below last year.
High feed costs should drive calf prices lower and reduce the incentive to place lighter weight cattle into feedlots, the LMIC said.
Given limited forage and high hay costs, it would seem likely that more calves would be moving at these prices, which are substantially higher than a year ago, the LMIC said. These incongruent signals point toward a smaller calf crop than was estimated on July 1 by the USDA.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $122.43 to $126.50 per cwt, compared with last week’s weekly range of $125.41 to $126.44. FOB dressed steers and heifers went for $192.44 to $197.05 per cwt, versus $198.02 to $199.92.
The USDA choice cutout Tuesday was down $0.67 per cwt at $342.11, while select was down $0.52 at $312.03. The choice/select spread narrowed to $30.08 from $30.23 with 58 loads of fabricated product and 31 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.60 to $2.00 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.40 over Sep, which settled at $5.34 a bushel, down $0.06 1/4.
Seven heifer delivery intentions were posted Tuesday against the Aug live cattle contract.
The CME Feeder Cattle Index for the seven days ended Monday was $159.54 per cwt down $0.02. This compares with Tuesday’s Sep contract settlement of $163.00 per cwt, down $1.05.