Boxed Beef Price Correlations to Feeder Cattle Prices
We are budgeted mid-yr with feeder cattle prices at historic levels and showing footling sign of slowing down. The question of what to expect in the second one-half of the year is on many minds. And then far, 2014 has been in sharp dissimilarity to the first half of 2013.
About a yr ago, feeder prices bottomed counter-seasonally in belatedly May/early June. Feeder prices today are 50 pct or more to a higher place this time last twelvemonth. Fed prices are currently virtually 24 percent higher than i twelvemonth ago, and pick boxed beef is roughly 15 percentage above the $200 per hundredweight (cwt) level that it first achieved ane year ago. It was merely virtually a year ago, that feeder prices began the increases that have connected to today.
Many factors are quite unlike between the first half of 2014 compared to the commencement half of 2013. Most notably, mayhap, is the change in feed prices. In the leap of 2013, with feedlot cost of gain at record levels, feedlots could begin to see the prospects for a dramatic change in corn prices with the coming 2013 crop.
Feedlot losses were severe enough that some feedlots essentially stepped out of the feeder market in the period from February until May, allowing feedlot inventories to drop until late summer and fall and thus softening feeder demand. At the same time, cow herd liquidation was still underway, supporting feeder supplies and limiting the subtract in beef production.
Through May of 2013, cattle slaughter was down less than one percent and beef production for the yr to date was even with 2012 levels. Heifer slaughter was down 3.8 percent year over twelvemonth while beefiness cow slaughter was up 3.one percent and dairy cow slaughter was up four.1 percent at that point in the yr. Connected drought and extremely tight hay supplies forced abandonment of heifer retention and resulted in more herd liquidation through mid-yr 2013.
So far 2014 has been very dissimilar. For one thing, nosotros are a year later with an even smaller herd and calf crop this yr. Secondly, though drought conditions persist in some regions and fifty-fifty expanded until recently, larger hay supplies and improved forage conditions in other regions suggest that heifer retentiveness and herd expansion are underway.
Heifer slaughter so far in 2014 is down 8 percent, and beef cow slaughter is down thirteen.8 percent along with an 11.five pct year to date decrease in dairy cow slaughter. Compared to last year, relatively moderate feed prices and strong boxed beef and fed cattle prices immune feedlots some positive returns in early 2014. The industry supply situation is significantly tighter now compared to this time last year. Total cattle slaughter is down 6.three percent, and beefiness production for the yr-to-appointment is downward five.8 per centum.
What happens to feeder prices in the 2nd half of 2014? Having reached such breathless levels in the past few weeks, it seems unlikely that prices volition continue to motion higher.
At the same time at that place is lilliputian reason for feeder prices to drop much, if any. Current feeder prices clearly suggest poor feedlot margins ahead. Today'southward feeder prices imply feedlots will interruption even at $160 per cwt or college in coming months. It will take a meaning increase in wholesale and retail beef prices along with fed prices to support these breakeven points long-term, even with the electric current good prospects for continued moderate feed prices.
Beef demand and the charge per unit of beef production in coming weeks and months will be very of import to determine the upper limits on prices. At the aforementioned fourth dimension, in the short run, in that location is little that feedlots can do about loftier feeder prices. In that location is no "ingather year" relief for feeder prices, like there was for corn in 2013. Feeder supplies will go on to tighten at least until 2016. The wring-out of feedlot capacity is not over yet.
Several factors could negatively touch feeder markets and should be monitored. Feeder prices could be pressured if corn market prospects were to modify and deteriorate significantly. Rapid and widespread redevelopment of drought conditions could pre-empt herd expansion once again and temporarily pressure feeder markets.
Neither of those weather related factors seem peculiarly threatening at this fourth dimension. Current U.S. feeder prices are pulling in relatively big numbers of Canadian and Mexican feeder cattle, simply overall feeder cattle supplies are tight in both countries. Mexico, in particular, is unlikely to exist able to sustain the current rate of feeder exports to the U.South. through the end of the year.
Despite robust demand so far, domestic and/or international demand for U.Due south. beef could weaken abruptly and pressure the unabridged beef and cattle circuitous. All of these factors will remain on the radar screen, only none seems to pose a meaning eminent threat at this time. All in all, there is relatively little downside risk for feeder markets in the 2d one-half of 2014.
I generally expect feeder prices to move more sideways in the second one-half of the yr. Some seasonal pressure could develop in the fall, only even that is likely to be muted. Peculiarly in the Southern Plains, moisture conditions and autumn forage prospects in Baronial and September volition be a key factor and could result in stiff stocker demand in the fall. 
Derrell S. Peel is a livestock marketing specialist for the Oklahoma Land Academy Extension.
—From the Oklahoma Cooperative Extension Service newsletter
Source: https://www.progressivecattle.com/news/market-reports/feeder-cattle-markets-at-mid-year-2014-vs-2013
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