Despite losses, US cattle feeders' plight could be worse

Cattle feeders in the US are losing about US$60 to US$70 a head based on this week's fed cattle price of US$85 per hundredweight, but many market analysts said the losses could be worse.

 

Given the amount of beef the US industry is producing and the recessionary climate, some market analysts say they could estimate that cattle prices could be much lower. Product demand may not be harmed as badly as in other recessions, they said.

 

"I could make a case that (fed) steers could be in the US$60s," said John Nalivka, president of Sterling Marketing Inc.

 

Another Plains analyst said he could make the same case, and he thinks prices this year will dip into the US$70s.

 

The US Department of Agriculture last week reported slaughter steer carcass weights averaged 822 pounds, 12 pounds heavier than last year's 810 pounds. Heifer weights last week were 745 pounds, 10 pounds up.

 

The five-year average steer carcass weight for the week is 793 pounds and for heifers 728 pounds, the USDA said.

 

Fed cattle weights have been heavier each year than the year before for several years continuing a long-standing trend as genetics and feeding practices change, the analysts said.

 

Nalivka said the average weekly steer carcass weight through the week ended May 9 is 844 pounds, versus 826 a year ago and the five-year average of 809 pounds. The cumulative average weight for heifers is 783 pounds, compared with 766 a year ago and 749 for the five-year average.

 

Nalivka has compared current beef production and slaughter rates with what was going on in the recession of 1982 and concluded that beef demand, though down from just a couple of years ago, isn't as depressed as it was then. If it were, cattle prices would be much lower, he said.

 

Rising carcass weights often are an indicator that slaughter-ready cattle are backing up in the feedlots, but Nalivka said that may not be the case this time. Genetics and feeding practices have changed, and they all are geared toward getting as much growth and weight on the animal as possible before they are sent to slaughter.

 

The Plains analyst, however, said cattle feeders may be getting behind in their ideal marketing rate. Cattle feeders often feel that the cheapest feeder cattle they can get are the ones they already own, he said. There are costs involved in just changing the population of the feedlot, even if the actual price of new feeder cattle hasn't changed since the last time.

 

Feeders get into a retentive frame of mind easily when they are losing money, as they are now, the analyst said. And the fact that weights are so far above just a year ago is a good clue that cattle marketings aren't as timely as they could be, he said.

 

There are other factors that have played into the cattle being larger than a year ago, the analysts said. Since late last summer, the average weight of the cattle being placed into the feedlots is up from a year earlier, and weather conditions generally have been favorable to cattle growth, they said. But whether cattle are backing up in the feedlots, beef demand may not be enough to get cattle prices up to profitable levels.