Herd expansion could begin soon, said Matthew Diersen, risk and business management specialist at South Dakota State University, in a Livestock Marketing Information Center letter called In The Cattle Markets.
Beef cattle inventory levels are expected to remain low, with feed availability and costs limiting factors, Diersen said.
THINGS ARE CHANGING
But heading into fall, there are a few signs of changing conditions that may allow for some expansion to begin, he said.
The largest change probably is on the range and pasture side where the latest USDA report shows much higher percentages in the continental US in good or excellent condition, compared with a year ago, Diersen said. There also are much lower percentages in very poor or poor condition relative to last year.
And, the reduction in herd inventory levels also means less demand on the pastures. In general, conditions are better in the eastern US and worse in the southwest, he said.
LOWER FEED DEMAND
Roughage consuming US animals are dominated by cattle, Diersen said. Several successive years of declining herds means less feed demand, particularly for forage.
Thus, pasture demand has declined, but other feed demand has been constant when aggregated across other livestock. The hay situation has improved from a buyer’s perspective, Diersen said. Production is up sharply from a year ago, mitigating a tighter old stocks situation.
Thus, supply is larger. He said, fewer roughage consuming animals translates into lower demand for roughage, pressuring prices.
A major demand source in recent years has come from hay importing countries, Diersen said. In part, high prices seem to have slowed trade, meaning more tons are available in the domestic market.
SILAGE
Regionally, the corn crop has a high level of variability, he said. Anecdotes of regional expected low grain yields suggest a larger-than-normal amount of corn may be switched to silage.
That can result in substantial tons of forage, albeit at lower energy levels than if grain production were normal, Diersen said. Distillers’ grains will likely make up any ration needs.
The most obvious effect of changing feed prices will show up in continued changes to the price slide across feeder cattle weight classes and the price spread between steers and heifers, he said. The expected price of corn is much lower than a year ago, helping to support calf prices and making the slide steeper than a year ago.
The spread also would widen, reflecting the better gain of steers over heifers, Diersen said. However, if feed availability improves and costs fall, cow/calf producers may look favorably on heifers as replacements, narrowing the spread.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $179.85 per cwt to $185.23, compared with last week’s range of $178.75 to $189.46 per cwt. FOB dressed steers, and heifers went for $280.56 per cwt to $290.72, compared with $283.80 to $293.58.
The USDA choice cutout Tuesday was down $2.68 per cwt at $314.36 while select was off $2.41 at $289.68. The choice/select spread narrowed to $24.68 from $24.95 with 78 loads of fabricated product and 29 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 $1.60 to $1.80 a bushel over the Sep corn contract, which settled at $4.69 1/2 a bushel, down $0.09.
No contracts were tendered for delivery against the Aug cattle contract Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $249.12 per cwt, up $1.29. This compares with Tuesday’s Aug contract settlement of $250.70 per cwt, up $0.45, and Sep’s $254.02, down $0.25.