Cattle Feeding Projections – February 2018
The January 1 USDA Cattle Report delivered the expected news of a larger cattle herd over the year prior, though numbers were at the lower end of pre-report estimates. A few highlights:
- All cattle and calves +0.7% year over year.
- Beef cows and heifers calved +1.6% year over year which resulted in a 1.4% increase in the 2017 calf crop.
- Heifers over 500-pounds identified as beef cow replacements -3.7% and the lowest number since 2015.
These numbers indicate more moderate herd growth than the previous two years. This is further supported by the increase in heifer (+12%) and beef cow slaughter (+6%). Feeder cattle availability has been tight (-8-11% in January) and has supported a recent run-up in cash prices. Live cattle futures have remained strong despite the recent slide in the stock market. The Choice Beef cutout is running a strong +8.6% year over year and is primarily supported by an increase in chuck values.
Domestic beef production is up 6.5% year over year and 3.8% YTD. Driving this increase in production is both an increase in carcass weights (+1.1% year over year to 832 pounds) and slaughter numbers (+5.5% year over year and +3.0% YTD). Domestic beef consumption (availability) is expected to increase 4% in 2018. With more beef available, the USDA expects a moderate reduction in sale price ($118/cwt live, -2.9% over 2017). Both domestic and export demand have been strong and look to support prices despite the increase in production and subsequent availability. The Restaurant Performance Index rose in January to 102.9; indicating an increase in consumer confidence and spending (strong correlation to beef purchases). The 4-week average for export values is up 11% year over year and up 30% over the 5-year average, further indicating the historic context of how strong exports have been.
Changes month over month on our feeding projections:
- Mixed changes in feeder purchase prices (Holsteins -$1.00-2.00/cwt, beef calves +$7.00-9.00/cwt, beef yearlings +$1.00-4.00/cwt).
- Expected fed beef cattle prices mostly stronger with all classes +$2.50-5.00/cwt.
- Increased cost of gain (+$0.80-1.10/cwt): corn +$0.14/bushel, corn silage unchanged, corn stalks unchanged, grass hay +$5/ton, DDGS +$6.50/ton, MDGS unchanged, and pelleted soy hulls unchanged.
- Strong profitability persists across the board for all classes of Holsteins.
- Mixed but modest changes in the profit outlook for beef steers and heifers with most classes projecting a $20-60/head loss.
As always, please note the difference in cost of gain ($7-12/cwt) and potential profits ($50-100+/head) between the high and low efficiency projections. Ensuring proper management and animal husbandry can make the world of difference in this regard. With Midwest winter conditions here to stay for at least the next month, it is imperative to focus on managing pens and bunks through these tough environmental conditions. Remember to keep this as a priority as profits on well managed cattle are hard to come by in today’s market and virtually impossible to find on those which are not managed to their full potential.
For more specific projections, please contact your Form-A-Feed representative.