Cattle Feeding Projections – November 2017
Feedlot placements continued their torrid pace as September numbers were up 13% over the same month a year prior. With feeder calf prices holding relatively steady while yearlings have jumped substantially (+$10-15/cwt), the calf-yearling spread has narrowed significantly. This indicates moving calves to wheat pasture rather than directly to the feed yard which may begin to temper placements. Lower feeder and fed cattle prices look to have slowed heifer retention as sales barn receipts for heifers destined for the fed beef supply have jumped a robust 21% over 2016. Carcass weights remain well below last year’s record highs (13-14 pounds). This is in direct contradiction to the trend of the past quarter century (+5.5 pounds annually), but is very explainable. Two key factors have contributed to this: 1) calves were pulled into feedlots at an escalated pace (lighter placement weights, smaller frame at finishing) and 2) fed cattle marketings were pulled forward consistently throughout the past year and remained very current. This trend is likely not sustainable and a return to the trend of heavier carcass weights should be expected with relatively low feed costs incentivizing heavier out weights.
Beef cattle slaughter is up 5.6% with slaughter weights down 1.6% year to date. Lighter carcass weights have somewhat offset this large slaughter number with total beef production up a more modest 3.9% in 2017. 2018 US beef production forecasts have been revised upward to the point where production is now expected to break the all-time record set in 2002! While exports have remained strong, a portion of this production increase is destined for domestic consumption. Domestic beef availability is expected to increase 3.3% in 2018; the largest jump since the mid-1970’s. Increases of this magnitude would be expected to weight heavily on beef prices. However, this is not expected to be the case as bullish demand should hold this price decline to a respectable 3.5%. The demand for beef, especially high quality beef, does not appear to be wavering as a stronger economy and subsequent higher per capita expenditures have provided support.
Changes month over month on our feeding projections:
- Mixed feeder calf prices: Holsteins softer (-$4.00/cwt), beef steers -$0.25 to +$0.25/cwt, beef heifers -$0.50 to +$4.50/cwt.
- Expected fed beef cattle prices were mostly bullish : Holsteins -$0.50-1.00/cwt (stronger futures, weaker basis), beef steers and heifers +$2.00-4.00/cwt.
- Mixed changes to cost of gain with TMR-fed -$0.10-0.20/cwt while self-fed +$0.60/cwt: corn -$0.04/bushel, corn silage unchanged, corn stalks +$5/ton, grass hay +$10/ton, DDGS +$7.50/ton, MDGS unchanged, and pelleted soy hulls -$2/ton.
- A more modest jump in Holstein profitability (+$5-15/head), but projected profits remain at lofty levels.
- Projected profitability in beef calves held mostly flat.
- Yearling profit outlook took a major step backward (-$60-85/head) with most classes now pricing off the June contract. Those which can still market off the April board still show some potential, but the window is closing fast.
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 nearing completion across most of the upper Midwest, it is important to refocus on pen and bunk management while also preparing yards for the looming 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.