US cattle feeders paying up for feeder cattle as profits sag

Cattle feeders in the Plains continue to pay up for replacement feeder cattle even though prices are reaching a point where the futures market says a profit may be a bit dicey.

 

The Chicago Mercantile Exchange's average feeder steer cash settlement price for Thursday (Apr 2) was up US$0.42 per hundredweight after rising $0.78 on Wednesday (Apr 1).

 

There were reports that some cattle feeders weren't willing to pay more for feeder cattle the last few days because of muddy feedlot conditions. A large spring snowstorm a week ago blanketed major cattle feeding areas with heavy snowfall; some areas received around two feet of snow.

 

Industry reports said this snow had melted and made feedlots muddy enough to discourage feedlot managers from putting cattle back into empty pens until conditions improved.

 

Feedlot operators in southwestern Kansas and the northern Texas Panhandle Friday (Apr 3), however, revealed feedlots generally were in very good shape. Feedlot managers said cattle already in the lots weren't even picking up any mud in their hair. One said trucks already were kicking up dust.

 

A northern Texas manager said the area hadn't received moisture for so long that the melting snow tended to soak in or run off into lagoons that were low because of the long dry spell. He didn't even scrape the snow out of all of his pens.

 

A southwest Kansas feedlot manager said crews were able to scrape a portion of each pen quickly after the storm, and the cattle hardly missed a beat. Cattle feeding customers of this feedlot weren't staying away from the feeder cattle auctions because of muddy conditions in the lot.

 

John Nalivka, president of Sterling Marketing Inc., said many cattle feeders see the herd numbers in USDA inventory reports, and they know the number of available feeder cattle is declining. They wouldn't let a little thing like muddy feedlots - if they existed - to deter them from buying feeder cattle, he said.

 

Cattle feeders should be watching their potential profit margins more closely because feeder cattle prices are reaching levels that the live cattle futures market is saying won't be reached when the feeder cattle eventually reach slaughter maturity, Nalivka and others said. This becomes especially important when looking at the corn market, which is "uncertain for the summer," he said.

 

However, Nalivka said he didn't expect cattle feeders to watch live cattle futures too closely just yet, even though profit margin potential is slipping away. They'll still buy the feeder cattle and feed cattle, he said.

 

Cattle feeders feed cattle. "It's what they do," Nalivka said. "It's a career choice," and without cattle in the feedlots, they aren't feeding cattle.