October 2017 Cattle Feeding Projections

Posted: October 23, 2017 | Written By: Simon Kern, M.S.

beef concentrates

October 2017 Cattle Feeding Projections

U.S. beef production continued its accelerated pace and is expected to be up 4.2% by year’s end over 2016. This trend is anticipated to continue through 2019 with projected increases of 3-5% and 1-4% for 2018 and 2019, respectively. Fed cattle slaughter for the week ending October 7 was up 3.5% year over year while total beef production was up just 2.0% year over year due to a decrease in carcass weights of 1.5%. The increase in cow slaughter was even greater at 8.6% over the same week in 2016. This increase is largely due to more beef cows coming to slaughter (+13%, contributing two-thirds of the increase in total cow slaughter). With cow-calf margins tightening significantly compared to 2015/2016 levels, producers now look to be liquidating marginal quality females. Additionally, drought in the Northern Plains has hastened the pace of cow herd liquidation regionally.

Offal/byproduct values have been very weak since mid-year. Softer hide values have been the primary driver behind this. With slaughter numbers up 5%, end users have not been able to absorb the increase hide supply and values have dropped upwards of 15%. Offal values currently stand at $10.50/cwt (live animal basis) compared to the five-year seasonal average of near $14.00/cwt. A strong 2017 for beef export markets was further bolstered by a 14.7% year over year increase in August. This was the largest month for U.S. beef export markets in more than four years (July 2013).

Changes month over month on our feeding projections:

  • Mostly stronger feeder calf prices: Holsteins virtually unchanged (-$2.00 to +$1.00/cwt), beef steers +$3.00-5.00/cwt, beef heifers +$5.00-6.00/cwt.
  • Expected fed beef cattle prices improved for the second consecutive month : Holsteins +$1.00-4.00/cwt, beef steers and heifers +$3.00-4.00/cwt.
  • Slight increase in cost of gain (+$0.20-0.30/cwt): corn -$0.01/bushel, corn stalks +$5/ton, grass hay +$5/ton, DDGS +$1.25/ton; corn silage, MDGS, and pelleted soy hulls all unchanged.
  • Another significant jump in Holstein profitability (+$20-60/head) with stronger sales prices and limited change in input costs.
  • Projected profitability in beef steers and heifers is mostly stronger (+$0-50/head) with high performers breaking into the black.
  • While most yearlings placed this month should market by April, beware of the seasonal April-June discount in the Live Cattle Futures Contract (-$75-85/head if marketing post-April).

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. Harvest is upon us and bunk and pen management can sometimes be pushed to the wayside in these busy times. 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 become a secondary priority.

For more specific projections, please contact your Form-A-Feed representative.

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