The fed-cattle market moved higher in October, ending the month close to $70/cwt. in the Amarillo area. While this helped feedlots register profits, it still allowed them to push feeder animal prices lower, mostly due to larger supply. Compared to last year, feds are $4 lower but feeder steers are bringing $15-20 more. All in all, the last two months have benefited all segments, but particularly cow-calf producers.
Cattle Feeding Is Up The cattle feeding segment continues to be bullish on the future. As of October 1, numbers of cattle and calves on feed in feedlots with capacities of 1,000 head or more reached 9.96 million head. That's up 13% from last year and 9% over the month-earlier figure.
Fed-cattle marketings in September were 1.82 million head. That's 15% more than last year but, as expected, down from the high levels of the last few months. Forecast equations now suggest even further reductions in October and November. Current weekly sales in the Southern Plains area, however, show fairly substantial feedlot movement. This also happened in September but probably because that area of the nation did record larger marketings than did the country as a whole.
Feedlot placements in September were 2.71 million head, up only 2% from a year ago. This likely reflects the losses currently being recorded by the lots. It still represents the largest placement level in several years.
The number of feeders by weight groupings placed on feed in September increased in only two categories -- less than 600 lbs., and the 800 lbs. or more group. These rose 16% and 8%, respectively. The other two weight classes -- 600-699 lbs. and 700-799 lbs. -- reported a decrease in numbers compared to last year. The two heaviest classes still represented the bulk of placements -- 64%.
The Future Of The Beef Industry The May issue of the Louisiana Rural Economist had an article in it entitled "A Discussion On The Future Of The Beef Industry In The United States." I highly recommend this excellent critique. The precepts are sound, the problems are real and, unfortunately, the solutions are quite limited. Here are a few of the comments in the article:
Per capita consumption of beef and chicken have been moving in opposite directions since the mid-1970s.
*Vertical integration has allowed the broiler industry to achieve, through changes in breeding, feeding and management, high and predictable uniformity in product being marketed on a geographic and chronological basis.
*The U.S. beef cattle industry is currently organized around mostly independent stages of production and marketing.
*Except through pricing policies, packers and feedlots pass very limited information back to the cow-calf producer on changes in consumer demand or on the performance of calves in the feedlot or packing house.
*Whereas broiler meat has become more uniform from bird to bird, beef differs almost on a carcass-by-carcass basis.
*Another factor contributing to uncertainty in the future of the beef industry is the apparent division of the beef market into two segments, a high-quality, high-price segment and a competitive, lower price segment.
*Reports suggest that major beef packers began contracting for cattle and feeding cattle in the feedlot primarily to ensure that adequate supplies of high-quality beef were available when needed.
*The competitive portion of the total beef market (USDA Select and ungraded) is in a battle for market share with poultry, pork and other meats.
*The separation of the beef market into high and competitive segments is probably permanent. This portion of the market is likely to become more vertically coordinated as buyer preferences filter down through the feedlot stage to the cow-calf stage.
The article also offers three options for the competitive segment of the beef industry: 1. Attempt to compete with poultry on a price basis; 2. Produce a product that is more responsive to consumer demand; and 3. Continue to accept a declining market share.
The Short-Run Outlook The fed-cattle market did very well in October. Cattle penetrated the $70 mark for the first time this year. This summer's large placement levels are still expected to show up this fall and winter. This could create a supply problem for the slaughter-cattle market. If feedlots avoid bunching, things could still go well.
Despite the increased seasonal movement of feeder cattle and calves, their prices are holding. Traditionally, calf prices hit a low in November when ranch sales peak. Grazing conditions and other weather factors affect the exact timing of such movement. So far, this year's weather has been great and marketings could be just a bit later.