Cattle Feeding Projections – March 2018
Large sections of the southern plains and the southwest have been experiencing dry conditions since the fourth quarter of 2017 (25% of the domestic cattle inventory is within areas experiencing drought). This has reduced the availability of wheat pasture for grazing and pushed more of the lighter feeder cattle formerly destined for a backgrounding program directly to feedlots. Feeder calf values have held strong and are running nearly 13% higher than a year ago.
Year-to-date domestic production data through the end of last week as compared to 2017:
- Federally inspected slaughter +2.4%
- Cow slaughter +6.3%
- Carcass weight +0.5%
- Beef production +2.9%
Marketing rates in February slowed considerably relative to expectations. At this point, the impact on inventory currentness and steer carcass weights has been minimal (882 vs. 878 year over year), but questions remain going into Q2. The Choice beef cutout took an earlier (by one week) and steeper seasonal jump than in 2017 and stands nearly 4.5% stronger. Supply growth has been somewhat limited and this has supported cutout values. Packer margins have held strong and should encourage a robust marketing rate into Q2. Additionally, retail features have held strong and provide product pull-through. January beef exports were robust to say the least (+14.5% over January ’17). Weekly data from February indicates this rapid growth rate will be sustained. Exports have added nearly $70 per head in value, but are now sitting in a precarious situation with the very real possibility of retaliatory action on trade to come. Time will tell if exports can continue to buoy cutout values or if their interruption will put a major dent in the profitability of the beef sector.
Changes month over month on our feeding projections:
- Mixed changes in feeder purchase prices (Holsteins +$5.00-10.00/cwt, beef steers -$2.25 to +1.50/cwt, beef heifers -$3.25-5.00/cwt).
- Expected fed beef cattle prices mostly softer with all classes -$1.50-3.00/cwt.
- Increased cost of gain (+$1.00-1.30/cwt): corn +$0.16/bushel, corn silage unchanged, corn stalks +$5/ton, grass hay +$20/ton, DDGS +$4/ton, MDGS unchanged, and pelleted soy hulls +$17/ton.
- Negative swing in net profits, but strong profitability persists across the board for all but one class of Holsteins.
- Downward movement in the outlook for beef steers and heifers profitability with all classes projecting even further into the red.
As always, please note the difference in cost of gain ($7-12/cwt) and potential profits ($50-200+/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 late winter/spring conditions here, along with the accompanying ice and mud, 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.