Feeder cattle and calf prices continued their rally last week, steady to $4 higher, as much as $7 higher on some lightweights. That’s despite continued strong grain prices and a fed-cattle market that lost $1-$3 on a live basis.

“The current situation of feeder-cattle demand and market levels brings back memories from 50 years ago, before the migration of cattle feeding that moved from small/independent farmer-feeders in the Midwest to the massive feedyards built in the dry/arid climate of the Southern Plains,” analysts with the Agricultural Marketing Service (AMS) explained Friday. “In the old stockyard river markets, finished-cattle trading was where the action was and the buying and selling of feeder cattle was on the backburner. Calf and yearling prices were very constant with little volatility between weights, classes and quality levels. Nowadays, it’s not uncommon to have $10/cwt. market changes from one week to the next and to have $30-$40 price ranges between feeder cattle that, in the whole scheme of things, are not that much different.”

A number of factors are fueling the contra-seasonal price rally (see “High Prices Add To Herd-Expansion Dilemma”). For the short term, though, it all boils down to tight supplies, relative to demand.

“Calves and yearlings over 600 lbs. haven’t yet reached historical highs as the CME Feeder Cattle Index (based on a 750-lb. steer) is just over $118, compared to the late summer of 2007 when it topped $120,” say AMS analysts. “However, continuous herd reduction has brought about unseen demand for lightweight calves and a spike in prices right during the fall run, with very limited availability of inexpensive forage sources. Many feeder-market analysts (including this report) expected lightweight steer calves to reach $2/lb. in instances at some point next spring. This milestone has already been reached for the first time in history with winter storms approaching, leaving market watchers to wonder what spring and green grass could bring.”

A string (68 head) of reputation, long-weaned, black-hided ranch steers weighing 340 lbs. brought $200.35/cwt. at Pratt Livestock Auction in Kansas last Thursday.

“Risk management continues to be important, especially to those buying stockers and feeder cattle to have finished,” says Emmit Rawls, University of Tennessee livestock economist, in last week’s Tennessee Market Highlights. “When purchase prices are high and feed costs are also at the highest levels since 2008, the risk of selling on a lower market can have major impact on the bottom line. While the outlook for 2011 prices is strong, protecting the downside, leaving the upside open, is recommended. Unless of course one can lock in a price that would assure an acceptable return,” he says.

The summary below reflects the week ended Dec. 10 for Medium and Large 1 – 500- to 550-lb., 600- to 650-lb. (calves), and 700- to 750-lb. feeder heifers and steers (unless otherwise noted). The list is arranged in descending order by auction volume and represents sales reported in the weekly USDA National Feeder and Stocker Cattle Summary:

^* Plus #2
^** None reported of the same quality at this weight or near weight
^(***) Steers and bulls
^(?) As reported, but questionable
^NDNo Description
¹500-600 lbs.
²550-600 lbs.
³600-700 lbs.
⁴650-700 lbs.
⁵700-800 lbs.
⁶750-800 lbs.
⁷800-850 lbs.
⁸850-900 lbs.