In early February the USDA’s Economic Research Service estimated lower returns for the farm sector in 2024.
Matthew Diersen, risk and business management specialist at South Dakota State University, said in a Livestock Marketing Information Center letter called In The Cattle Markets, that the cattle sector, aggregating everything from cow-calf operations through feedlots, was expected to see lower returns as lower traded volume offsets higher prices. At the same time, higher feeder cattle expenditures were expected to continue.
Another major cost item, interest expense, was expected to remain high, as steady to lower interest rates are offset by higher loan volumes, he said. At the local level, higher rates pressured returns on crop storage, resulted in higher operating expenses and factored into the value of replacement heifers.
AG PRICE REPORT
The January Agricultural Prices report included data on other cost aspects, Diersen said. The annual prices for feeder cattle showed a steady increase for cattle and calves in recent years to $223 per cwt in 2023.
The grazing fee rates in the same report again were up at the multi-state level for animal units, he said. There was a slight decrease in the rates on a per-head basis.
Grazing rates continue to be the highest in Nebraska and South Dakota, Diersen said. Kansas had a sharp increase last year. High prices for substitute feedstuffs (corn and hay) for much of 2023 likely pushed grazing fees.
Higher prices for cattle are necessary to justify or sustain higher grazing fees going forward, Diersen said. Any turnaround in cattle prices would pressure fees.
Less corn and hay price pressure would be bullish news for cattle returns, he said. Ending stocks for both feedstuffs were forecast to be larger in 2024, resulting in lower input prices.
The volatility in live and feeder cattle prices has come down since a small peak about two months ago, Diersen said.
FINALLY
A final cost pressure depends on one’s perspective: feeder cattle continue to trade at high levels, he said. The CME Feeder Cattle Index reached an all-time high of $254.10 per cwt on Sep. 20. Recent index values have been around $243.00, — record levels for this time of year.
For calendar year 2023, the index reflected 1.37 million head, Diersen said. Volumes were highest from Oklahoma and Texas, both with more than 200,000 head.
The direct trade in Texas often was high, including a week with more than 10,000 head, he said. Volumes also were high in South Dakota, Missouri, Nebraska and Kansas, with each state accounting for 100,000 to 200,000. Iowa, North Dakota, New Mexico, Colorado, Wyoming, and Wyoming each had less than 100,000 head.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $180.75 per cwt to $180.92, compared with last week’s range of $175.69 to $183.00 per cwt. FOB dressed steers, and heifers went for $287.86 per cwt to $288.11, compared with $280.06 to $290.07.
The USDA choice cutout Monday was up $0.89 per cwt at $297.09 while select was up $0.74 at $287.40. The choice/select spread widened to $9.69 from $9.54 with 82 loads of fabricated product and 23 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 $1.35 to $1.45 a bushel over the Mar corn contract, which settled at $4.16 1/2 a bushel, down $0.01 1/4.
Nine heifer and 14 steer contracts were tendered Friday for delivery against the Feb live cattle contract.
The CME Feeder Cattle Index for the seven days ended Thursday was $244.58 per cwt, down $0.35. This compares with Friday’s Mar contract settlement of $251.02, up $3.92.