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Feedlot Pressures Cap Price Potential for Now

Feedlots facing supply price pressure
Calf and yearling prices will likely remain near recent levels, according to the Livestock Marketing Information Center. Normal weather and growing conditions in 2013 could push calf prices $5 to $15/cwt. higher in the fourth quarter next year.

Despite the volatility of calf and feeder prices this year, analysts with the Livestock Marketing Information Center (LMIC) pointed out last week that cattle of all types sold for higher average prices this year, and annual average prices will be record-high.

“In early 2013, calf and yearling prices will not reach 2012’s lofty levels,” LMIC analysts say. “Feedlots simply cannot afford to pay last year’s prices. If the 2013 growing season is normal for both crops and pastures, calf and yearling prices will likely return to posting year-on-year gains in the second half of the year. Rather normal weather could take 2013’s fourth quarter calf market $5.00 to $15.00/cwt. above this year’s.”

The LMIC folks point out that as feedlot red ink flowed in torrents last summer, calf prices (basis 500-600- lb. steer – Southern Plains) crashed $28/cwt. from the third quarter compared to the second. Yearling prices plunged $11/cwt. For the remainder of this year, they expect calf and yearling prices to remain near recent levels.

As for fed cattle, the LMIC folks explain, “Slaughter cattle prices may be in for some short-term setbacks in coming weeks, but for the balance of this year, prices are forecast to trade sideways. For the year, fed cattle prices will average over $120.00/cwt. for the first time ever (up about 7% from 2011’s). In 2013, the highest fed cattle prices are likely to occur in the second and fourth quarters, each could average over $130.00/cwt. Annual average cull cow prices next year will set new record-highs, supported by lower slaughter and very high meat markets.”

For perspective in the ongoing dilemma of excess cattle feeding capacity relative to declining calf supplies, consider that there were 2,091 feedlots with 1,000-head-or-more capacity in 2000. That’s according to the annual summary from the National Agricultural Statistics Service (NASS). In 2011, there were 2,140. In 2000, total bunk capacity of those yards was estimated at 16.5 million head. It was 17.0 million head in 2011.

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