Wild fluctuation in the corn markets and uncertainty over the large variation in harvest predictions has led to an up-again, down-again feeder cattle market. Buyers looking to place cattle on feed have had a tough time recently in deciding whether to take heavier, bunk-ready cattle over the attractive prices on quality, lighter-weight calves which have seen a decrease in demand as corn prices stay high.
The fall calf run has started and has been fairly heavy in many auction markets around the country, but for feedlot operators without a comparatively cheap source of feed, questions concerning the corn markets have caused many buyers to remain cautious. Although finding forage at reasonable prices hasn’t been easy, recent analysis in some of the major feeding areas has shown that cheaper gains can be had by backgrounding cattle on grass before switching them to corn. Prospective buyers have already started switching their attitude and have begun searching for lighter cattle at decent prices to run as stockers.
Darrell Mark, professor of ag economics at the University of Nebraska-Lincoln, recently spent time examining the historic breakevens when comparing systems that feed out either lightweight calves or yearlings in the feedlot. As buyers begin putting pencils to paper and the corn markets continue to shake, the research takes on greater importance.
"As corn prices have more than doubled in the last two years, cattle producers increasingly look for alternatives to finishing calves exclusively in feedlots on high concentrate rations," Mark said, pointing out that feeders have traditionally placed a high proportion of fall-weaned calves on feed in the fall and sold them as fed cattle in May before seasonal summer price declines.
"However, as feeding cost of gain has increased from about $50/cwt to nearly $100/cwt in the past two years, livestock operators have more incentive to background calves during the winter and following summer on forages and delay placing the cattle on feed until they are long yearlings at the end of the summer grazing season," he noted. "However, one factor that must be considered before changing the production system is cattle size. Large-framed, heavy calves weaned in the fall may have to be fed as calf-feds to minimize overweight carcasses."
Mark points to UNL research which examined the performance of both calf-fed and yearling feeding operations from 1996 to 2007. Findings indicate that the difference in returns between the two systems is relatively small (around $4 per head), but highly variable, as shown in Figure 1.
Average returns to the calf and yearling systems were $20.83 per head and $16.77 per head, respectively, but ranged from losses exceeding $175 per head and to profits greater than $350 per head. In the ten years of the study where both systems were directly comparable, Mark notes, the yearling system was more profitable than calf finishing in four years and less profitable in six of the years. There also seemed to be little correlation between higher profits in the yearling system and high corn prices.
"As cattle feeders, backgrounders and ranchers considering retained ownership look ahead to this fall’s calf crop, decisions need to be made whether to place calves on feed or background them through the winter, and possibly the following summer, and not place them on feed until they are long yearlings next fall," he explained. "Assuming cattle performance in these systems is similar to the previous years in this study and using forecasted prices as of late August 2008, it appears that the yearling system could generate returns of $69.48 per head, compared to $2.40 per head for calves placed directly on feed and targeted to sell in May 2009."
Last week’s sale at the Oklahoma National Stockyards in Oklahoma City, OK, saw receipts of 11,721, where compared to the previous sale, feeder steers were steady to $1 higher, with feeder heifers mostly steady. Calves were steady to $4 higher, with the advance coming on the weaned kinds. The run included a string of fresh, ranch-raised calves sold in large bunches to very good demand. Demand for feeder cattle was good with widespread buyer participation. Demand was moderate for steers over 850 lbs. and heifers over 800 lbs. as these cattle were in light supply. Average quality of the offerings improved some last week. Steers weighing 720 lbs. sold for $113.15, while heifers weighing 727 lbs. sold at $108.17.
The Joplin Regional Stockyards near Joplin, MO, received 7,000 head of cattle last week, where compared to the previous sale, steers were steady with instances of 600-800 lb. steers steady to $1 higher. Heifers under 650 lbs. were steady to $2 higher, with weights over 650 lbs. steady. However, several lower-quality heifer calves were $1-2 lower. Demand was moderate for calves, and moderate to good for yearlings. Feeder steers weighing an average of 730 lbs. brought $111.93, while heifers weighing 722 lbs. sold for $105.45.
Last week’s sale at the Winter Livestock Feeder Cattle Auction in Dodge City, KS, offered 2,425 head for sale, where compared to the previous week, steers from 600-900 lbs. and heifers from 650-950 lbs. were weak to $2 lower. Steers weighing 600 lbs. and heifers weighing 650 lbs. and under carried a lower undertone, though there were not enough for an adequate market test. Buyers paid $114.25 for steers weighing an average of 724 lbs. and $103 for fleshy heifers weighing 735 lbs.
There were 3,000 cattle received last week at the Huss Livestock Market in Kearney, NE, where steers and heifers traded steady to $3 lower. Demand was moderate to good and trade activity was mostly moderate. Some 43 percent of the heifer offerings at this sale were spayed. Steers weighing 719 lbs. brought $110.88, while 741 lb. heifers were good for $107.71.
Good demand was noted for the 851 cattle received last week at the La Junta Livestock Commission Company in La Junta, CO, where compared to the previous sale, steer and heifer calves were steady to $1 higher. Yearling feeder steers and heifers were steady. Steers with a full weigh-up of 804 lbs. brought $108.85, while heifers weighing 860 lbs. sold at $95.50.
The Torrington Livestock Commission Company in Torrington, WY, offered 1,200 head at last week’s sale, where steers and heifers were steady to $2 lower in a limited test on moderate to good demand. Buyers paid $109 for 767 lb. steers, and $105.51 for heifers weighing 773 lbs.
A good run of 5,614 head was seen last week at the Miles City Livestock Commission Company in Miles City, MT, which had the first reported sale of fall feeder cattle. No trend was available due to no recent sale, though demand was good for several thin-fleshed packages. Steers weighing 736 lbs. sold at $110.48, while 724 lb. heifers brought $105.09.
Last week’s sale at the Stockland Livestock Auction in Davenport, WA, saw receipts of 968 head, where active trade and moderate to good demand was noted for all offerings. No trend could be established due to a dark market as a result of the Labor Day holiday the previous week. Steers weighing an average of 724 lbs. sold at $101.03, while 784 lb. heifers were good for $89.50. — WLJ