Cow-calf production is widespread across the country. According to the Cattle report for Jan. 1, the five largest beef cow states have 39.1% of the total beef cow herd but a total of 18 states have at least 2% of the total beef cow inventory.
The majority of calves move to the middle of the country as stocker or feeder cattle and are assembled into larger groups, culminating in relatively concentrated feedlots. The top five cattle feeding states have 71.9% of total cattle on feed. Most feeder cattle change hands at least once to as many as four or five times by the time they are finished in the feedlot.
Feeder cattle prices are the thread that connects and coordinates production and marketing between sectors that frequently have no contact beyond market transactions.
Feeder cattle prices around the country reflect local supply and demand conditions and the economic process of moving cattle to the middle of the country where feedlot production is concentrated.
The average price of 500-pound, M/L, No. 1 steers in for the first three weeks of April range from a high of $410.01/cwt in Nebraska to a low of $362.66/cwt in Mississippi, a spread of 11.5% from high to low. It is generally true that the highest feeder cattle prices will be in Nebraska with prices declining in all directions away from Nebraska.
The pattern for bigger feeder cattle is similar. Prices range from the Nebraska high of $315.05/cwt, to the Mississippi low of $256.81/cwt. The spread from high to low is 18.5%. Most of the regional price differences are explained by the transportation costs to cattle feeding areas with the discounts bigger for heavy feeder cattle, which cost more (on a per head basis) to ship.
Feeder cattle markets reflect the economic principle of the “law of one price.” This concept states that prices are equivalent when adjusted for differences in time, place and form. Feeder cattle prices differ according to location, weight and other factors but reflect an underlying equilibrium due to arbitrage that occurs in feeder cattle markets between cow-calf and feedlot.
The stocker industry plays a critical role in this market arbitrage, providing time, place and form functions and production value for growing cattle. — Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist
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