Cattle Feeding Projections – December 2017
Strong feeder cattle demand and increased placements (+9% YTD) have continued to support higher cash feeder calf prices (+21.6% year over year). The feeder vs. fed price spread has climbed steadily throughout 2017 until its peak in October. It has tempered over the past 4-6 weeks, but remains near the five-year average. Domestic beef slaughter continues its strong pace (+5.5% YTD). While total beef production is stronger as well, it continues to trail slaughter (+3.8% YTD) due to the currentness of marketings and subsequently lighter carcass weights (-14 lbs./-1.5% vs. 2016). Packers have remained aggressive in their purchases going into December and appear to be in the midst of filling their holiday orders. This is evidenced by stronger cash fed cattle prices (+7.3% year over year) and record weekly slaughter numbers (over 517,000 last week, +5.1% over 2016).
2017 continues to remain on pace to be a record setting year for beef exports with volumes expected to be the largest ever. October extended the streak of year over year increases in U.S. beef export volume to 16 months with an increase of 9.3% over October 2016. October also marked an extension of another streak as U.S. beef imports increased for the seventh consecutive month. Despite this, the U.S. continues to be a net exporter of beef. While the Choice beef cutout has increased over 2016 (+9%), there are mixed signals in regard to post-holiday demand. On the negative side, forward sales have begun to trend downward over the past few weeks and competing meats appear to be in abundance and priced competitively. Still there are positive drivers which have to potential to start 2018 strong: a robust economy, minimal unemployment, and the knowledge that demand has defied expectations all year. Regardless of the outcome of the battle between these opposing forces, the ability of the market to absorb increased beef production is set to play a key role in the beef complex in 2018.
Changes month over month on our feeding projections:
- Stronger feeder calf prices (Holsteins +$5.00-6.50/cwt, beef calves +$0.25-1.00), but softer yearling prices (-$5.00-10.00/cwt).
- Expected fed beef cattle prices bearish : Holsteins -$3.00-5.00/cwt, beef calves -$5.00-6.00/cwt, and yearlings -$6.00-14.00/cwt.
- Increased cost of gain (+$1.25-1.75/cwt): corn +$0.10/bushel, corn silage unchanged, corn stalks -$5/ton, grass hay unchanged, DDGS +$7.50/ton, MDGS +$5/ton, and pelleted soy hulls unchanged.
- Higher purchase prices, increased feed costs, and lower sale values all combined to put a massive dent into profitability across the board (mostly -$70 to -$150 per head).
As always, please note the difference in cost of gain ($6-11/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 harvest completed across most of the upper Midwest, it is important to refocus on pen and bunk management while also preparing yards for winter. 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.