Current price difference between steer and heifer calves could work to slow the placement of heifers into feedlots, said Elliott Dennis, Extension livestock economist at the University of Nebraska, Lincoln, in a letter to Extension agents called In The Cattle Markets, published by the Livestock Marketing Information Center.
For now, there are hints the breeding herd will be smaller in 2023 and 2024, Elliott said.
PRICE DIFFERENCE BACKGROUND
Heifer calves generally are discounted relative to steers because of their tendency to finish at lower weights, with lower daily gains and higher feed conversions, he said. Large price differences provide incentives for heifers to be retained in the herd, so the price spread varies, depending on the cattle cycle and the seasonal availability of feeder cattle for placement.
Price differences are larger for lighter calves (500-599 pounds) versus heavier cattle (700-799 pounds) because of something called the price/weight slide, Elliott said. In Nebraska, the price difference for lighter feeder cattle tends to be largest in winter and slowly declines through the year. For heavier feeders, the price difference climbs through the year, peaking in the summer.
Price differences also tend to widen during periods of herd contraction and narrow during periods of growth, he said. The magnitude of these price differences varies greatly given market conditions and consumer demand.
However, higher feeder cattle prices tend to expand the top end of the ranges (i.e., steers rise faster than heifers because of their ability to finish), which translates to greater heifer discounts, Elliott said. This is what appears to be happening this year. The price difference in lighter and heavier feeder cattle is much larger than it has been over the last five years.
Q4 SPREAD UNKNOWN
The fourth-quarter steer/heifer price difference is still unknown, Elliott said. Given historical patterns, one could reasonably expect the difference to be smaller relative to price spreads earlier this year but slightly higher than the five-year average. This would put the steer/heifer spread for Nebraska feeder cattle somewhere between $15-17 per cwt for 500-599-pound feeders and $7-12 per cwt for 700-799 pounders.
The caveat is that the steer/heifer price difference from a video auction out of the North Central region for delivery in September, October and November suggests the difference could be much larger, he said. Feeder cattle weighing 500-600 pounds for delivery in November had a price difference of $23.69 per cwt, considerably higher than historical averages.
Of particular interest was the sharp narrowing of the spread at heavier weights this fall, because heifer prices were nearly flat from about 700-900 pounds, he said. In other words, there is a significant premium to deliver heifers at higher weights this fall, which could delay herd rebuilding efforts.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $143.00 to $146.33 per cwt, compared with last week’s range of $142.00 to $147.86. FOB dressed steers, and heifers went for $224.47 to $227.94 per cwt, versus $222.00 to $227.67.
The USDA choice cutout Wednesday was down $0.98 per cwt at $247.06 while select was off $2.69 at $219.22. The choice/select spread widened to $27.84 from $26.13 with 141 loads of fabricated product and 28 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 $1.95 to $2.05 a bushel over the Dec futures and for southwest Kansas were steady at $1.00 over Dec, which settled at $6.84, up $0.01.
The CME Feeder Cattle Index for the seven days ended Tuesday was $175.58 per cwt down $0.09. This compares with Wednesday’s Oct contract settlement of $176.55, up $1.90.