Grain Rally Pressures Feeder Prices
Softer wholesale beef prices and fed cattle trading $2 lower in the cash market (mostly $93 live and $148 dressed) pressured feeder-cattle prices last week. But the most pressure came from a rally in feed grains, led by wheat.
July 31, 2010
Softer wholesale beef prices and fed cattle trading $2 lower in the cash market (mostly $93 live and $148 dressed) pressured feeder-cattle prices last week. But the most pressure came from a rally in feed grains, led by wheat.
The story goes that Russian drought may prevent wheat exports from that country. However, Rodney Jones, Oklahoma State University Extension ag economics specialist, pointed out at least week’s Cattle Trails Stocker Conference in Wichita Falls that projections call for massive ending wheat stocks in the U.S. and worldwide. Plus, like the U.S., Russia accounts for about 10% of global wheat production. In other words, there is no fundamental reason for the spike in wheat prices.
At auction, yearling steers and feeder heifers sold unevenly steady – mostly $1 lower to $1 higher – and mostly steady to $1 in direct sales.
“Steer and heifer calves sold steady to $3 higher, especially in the Southeast, as abundant grass continues to keep backgrounders in the market for stocker cattle,” said analysts with the Agricultural Marketing Service (AMS). Analysts note that, in addition to the most verdant pasture conditions the nation has seen in years, continued beef-cow liquidation leaves more pasture for stockers.
“There have been many notions as to why our beef-cow harvest has been so large this year (the largest year to date since 1996 when the beef-cow inventory started the year nearly 9% larger), including an aging herd, an aging cow-calf producer, urban sprawl, the expansion of row crops, and the struggling economy (which may have more to do with why hamburger meat is in such high demand),” AMS analysts explained. “But, perhaps the biggest reason for a producer’s decision to sell his cows this spring was the 2009-2010 winter, which was the longest and most miserable in recent memory.”
Add to that the fact that even though calf and feeder prices are high by historical standards, higher and more volatile input costs continue to narrow margins on average.
According to USDA’s mid-year cattle inventory, beef cows and beef heifers retained as replacements were both 2% less July 1 than a year earlier (see "Beef Herd Continues To Shrink"). For more information about continued beef-cow liquidation, see "Expanding in Today’s Market," in the August issue of BEEF magazine at beefmagazine.com.
“Some producers have attempted to buy back offerings of older fall-calving cows in recent weeks to make use of their unusually lush pastures, but record-high, slaughter-cow prices have proven packer cow buyers to be formidable bidding opponents,” AMS analysts explained. “The higher quality and most desirable of these bred cows tend to tip the scales as body condition scores are high this summer. A 1,250- to 1,400-lb., solid-mouthed, third-stage cow will easily yield $750-$850 for slaughter, causing a buyer (that hopes to claim the calf and sell the much lighter cow on an uncertain weigh-up market) to wear out his pencil.”
The summary below reflects the week ended July 30 for Medium and Large 1 – 500- to 550-lb., 600- to 650-lb. (calves), and 700- to 750-lb. feeder heifers and steers (unless otherwise noted). The list is arranged in descending order by auction volume and represents sales reported in the weekly USDA National Feeder and Stocker Cattle Summary:
Summary Table |
State |
Calf Weight |
OK |
TX |
MO |
KY* |
AL |
AR |
KS* |
FL** |
MS* |
SD |
Carolinas* |
LA* |
GA*** |
TN* |
NE |
NM |
IA |
VA |
MT |
* Plus #2
** None reported of the same quality at this weight or near weight
(***) Steers and bulls
(?) As reported, but questionable
NDNo Description
1500-600 lbs.
2550-600 lbs.
3600-700 lbs.
4650-700 lbs.
5700-800 lbs.
6750-800 lbs.
7800-850 lbs.
8850-900 lbs.
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