Packers Likely Forced To Pay More For Cattle

Despite operating in the red, beef packers may be forced to pay up for slaughter-ready cattle again this week as the cash market appears to be weathering a period of higher fed cattle numbers with aplomb.

Cash cattle traded last week at $159 to mostly $160 per cwt on a live basis, up from $156 to $158 the week before, a gain of about 2.1%.  On a dressed basis, cattle traded last week at $252, up 2.53% from an average of $245.78 the previous week.

That was done at a time when feedlot placement data showed there should be plenty of cattle coming to market and after the previous week’s nearly non-existent cash trading.

Instead of falling, as many had predicted, Southern Plains cash cattle prices have actually moved sideways, following the seasonal trend.  The only difference is that this year’s moves since mid-August have been much more volatile than the five-year average.




However, all is not well for the Plains feedlot owner as replacement feeder cattle prices remain record high.

The average 700- to 800-pound feeder steer at Oklahoma City last week sold at $240.07 per cwt, a 1.60% gain from $236.29 the previous week.  Back-of-the-envelope calculations indicate such steers likely would turn in about a $260-per-head loss.

And, USDA placement data indicate tighter supplies of feeder cattle are in store, meaning even higher prices that will negate or overwhelm the lower prices for feed coming from a record corn harvest, which apparently is so large the harvest pace has been slowed by the sheer volume of grain going through the combines, transportation and storage facilities.

So, with a combination of record-high feeder cattle prices, low corn prices and negative margins, feedlots likely will continue feeding cattle to even heavier weights.




Meanwhile, beef packers are caught in a bind.  With strong fed cattle prices and record feeder cattle prices pinching feedlot margins and making managers tough negotiators, packing plant margins are being hurt further by lower wholesale beef prices.

There is even talk in the industry of another packing plant that is being targeted for closure.  Just which one is not clear, however.

USDA choice boxed beef prices last week came in at $238.19 per cwt, down $1.43, or 0.60%, from $239.62 the previous week and down $24.07, or 9.18%, from the record high of $262.26 set the second week of August.

A chart of weekly prices done by the Livestock Marketing Information Center shows the choice boxed-beef price closing in on last year and the previous five-year average.  Last week, the price was $42.54, or 21.74%, above last year’s $194.65 and $75.02, or 45.98%, above the $163.17 average.