Monday, March 6, 2023
HomeMeatFile costs? Is dependent upon the cattle you’re promoting

File costs? Is dependent upon the cattle you’re promoting


As cattle costs transfer upward and tighter beef provides turn into extra sure, there’s a lot chatter across the nation concerning the prospect of report cattle costs. Whereas there are lots of good causes for the optimism, feed costs may dampen the keenness.

USDA projected a decline in corn costs from $6.70 per bushel within the 2022-23 advertising 12 months to $5.60 for 2023-24. That might be welcome information if realized, however nonetheless leaves feedlots paying extra for feed (and having much less cash obtainable to bid for calves) than at a $4-per-bushel corn worth.

Fed vs. feeder steer worth

The five-area direct fed steer worth for January 2023 averaged $156.30 per cwt, a determine greater than 40% greater than simply two years in the past.

The trail of fed steer costs in current months bears some resemblance to that of the excessive worth interval of the earlier cattle cycle, when fed steer costs marched to a month-to-month report excessive of $169.50 in November 2014.

In the meantime, feeder steer costs traced a unique trajectory.

There was a 30% run-up within the 600- to 650-pound feeder steer worth between January 2021 and January 2023. However this pales compared to the 75% improve between January 2013 and November 2014 that resulted in a report excessive of $262.34.

There are a lot of variations between this cattle cycle and the final one, however the largest one affecting cattle worth actions is feed costs.

Corn value impacts farmer, feeder

After retreating to only over $5 per bushel in October 2021, the month-to-month U.S. corn worth averaged $6.76 per bushel throughout 2022. It remained above $7 for each month between April and September.

This contrasts with falling costs in the course of the harvest seasons of 2013 and 2014, when costs dropped from $7.04 per bushel within the first quarter of 2013 to $3.65 by the fourth quarter of 2014.

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Cow-calf producers are gaining advertising leverage, however as calf numbers turn into scarcer, the power and willingness of feedlots to pay up for feeder animals is drastically influenced by their feed payments.

In keeping with historic estimated livestock returns from Lee Schulz at Iowa State College, the feed prices for ending a 560-pound steer calf in Iowa bought in January 2015 was $265 per head lower than for a calf bought in January 2013. Simply think about how that a lot extra money may translate into greater bids for feeder animals if corn costs had been to take an identical trajectory over the subsequent couple of harvest seasons.

Demand drives worth

It appears doubtless {that a} new month-to-month report for fed steer values might be set in some unspecified time in the future within the subsequent couple of years.

Beef demand stays stronger than a decade in the past, whilst shoppers face financial uncertainty. The rise in cattle costs in the course of the previous two years occurred whilst home beef availability barely elevated, in comparison with decreases in 2013 and 2014. We are going to doubtless have two to a few years of beef availability tightening nonetheless forward of us.

Nevertheless, it is going to be tough to method earlier report excessive calf costs till we see some downtrend in feed prices.

Brown is a livestock economist with the College of Missouri. He grew up on a diversified farm in northwest Missouri.

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