The excitement surrounding the cattle markets is undeniable, and the cow/calf producer is set to benefit greatly under these conditions, said Scott Clawson, Oklahoma State University Extension area economist, in a letter called Cow-Calf Corner.
Yet, being curious by nature, he said he couldn’t help but wonder how these record-breaking calves will work through the supply chain for the next 18 months from a business point of view.
THE FEED FACTOR
Cheap abundant feed could land calves in the feed yard this fall, but many will end up in the countryside until spring, Clawson said. These record level calf prices will affect two cost categories specifically as producers budget wintering calves in 2025/26.
Interest expense and the cost of death loss go hand in hand with the value of the cattle, he added.
First, interest expense will increase meaningfully, Clawson said. This is a function of the sizable rise in calf value and a rate environment that has changed in recent years.
The value of a 450-pound steer has increased roughly 60% from last fall, he said. This purchase price increase combined with a flat or slightly improved interest rate environment will hike producer interest expense per head significantly.
Even if these are personal, ranch-raised calves not purchased on a line of credit, the interest is important, he said. This is the potential interest that could be earned by selling calves this fall and investing the proceeds elsewhere.
No matter what side of the interest coin a producer falls on, the sheer dollar value of the cattle makes this significant, Clawson said. This example calculates interest expense at $89.30 per head.
THEN THERE IS DEATH LOSS
Death loss expense also is rising as a function of the increasing cattle value, he pointed out. While death loss percentages vary by year, having a solid understanding of the death loss percentage on a producer’s operation is important.
In this example, 2% death loss is used, Clawson said. It is assumed to have occurred day one before feed and other inputs are invested in the calf for the sake of simplicity.
At a minimum, the remaining 98% of calves will have to pay the tab for the 2% mortality rate, he said. Just recovering the lost funds from the purchase price of those calves pencils out to $44.10 per head in this example, each producer’s results will vary.
Even with the historic cattle prices, Clawson advised keeping the pencil out and sharp. A good plan is a great place to start the decision-making process.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $233.39 per cwt to $241.00, compared with last week’s range of $238.09 to $244.00 per cwt. FOB dressed steers and heifers went for $365.79 per cwt to $375.71, compared with $373.45 to $379.73.
The USDA choice cutout Monday was up $1.07 per cwt at $363.34 while select was up $2.59 at $347.97. The choice/select spread narrowed to $15.37 from $16.89 with 126 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $427.19 per cwt, and 50% beef was $140.61.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged to down $0.05 at $1.00 to $1.20 a bushel over the Dec corn contract, which settled at $4.21 3/4, up $0.02 1/2.
The CME Feeder Cattle Index for the seven days ended Friday was $363.47 per cwt, up $0.90. This compares with Monday’s Oct contract settlement of $362.40, up $5.22.