Market Highlights: Fewer Heifers in Feedyards

Fewer heifers entering the feedyard means more calves could be coming...in several years.
By: Andrew P. Griffith, University of Tennessee

FED CATTLE: Fed cattle trade was not well established at press. However, the market looked to be weakening relative to the previous week.

The 5-area weighted average prices thru Thursday were $157.28 live, down $1.21 from last week and $247.87 dressed, down $1.84 from a week ago. A year ago prices were $145.13 live and $231.84 dressed.



Cattle feeders have been enduring week after week of negative margins, and it does not appear margins will turn around in the near future. Cattle feeders are being hit from three different sides. It has become more and more expensive to replace inventory as feeder cattle prices have found firm footing in late spring. Similarly corn prices are showing some signs of strengthening which will increase feed cost.

Cattle feeders have benefited from a fed cattle market that has maintained its ground for several months now. However, the fed cattle market has started to slide the past few weeks, and it is likely it will continue to do so through June and July. Current margins are not as bad as what was experienced in 2012 and 2013 but feedlot managers may find it difficult to manage through this market.
 
BEEF CUTOUT: At midday Friday, the Choice cutout was $245.17 down $3.31 from Thursday and down $9.94 from last Friday. The Select cutout was $238.83 down $1.68 from Thursday and down $4.74 from last Friday. The Choice Select spread was $6.34 compared to $11.54 a week ago.



The market is not hesitant in moving as it appears to move in leaps and bounds. In the matter of three weeks packers are feeling the squeeze as boxed beef prices have plummeted. The Choice cutout has lost more than $17 since the middle of May which is a little over a 6 percent decline in price.

It is not all bad for the packing industry as packers continue to experience positive margins. Packers generally win the battle over feedlots this time of year due to leverage being shifted their way with the seasonal increase in fed cattle marketings. However, there is a chance that packer margins will turn red this summer as retail beef prices remain escalated.

The Select cutout is holding up a little better than the Choice cutout as it has only declined about $12 or 4.6 percent in the same time period. Many analysts are expecting beef movement to struggle this summer when compared to previous years. However, all forecasters have been known to be wrong, and this is a time when beef prices could either continue to falter or find firm footing.

OUTLOOK: Calf prices and feeder cattle prices moved a few dollars higher this week at weekly auction markets while slaughter cows and bulls were steady. Cash feeder cattle prices are expected to remain firm the next several weeks before finding some upside potential in July and August.

The feeder cattle market will continue to be supported by the relatively small number of feeder cattle available to enter the feedlot. However, the quantity of feeder cattle available to enter the feedlot may improve more quickly than previously expected.

The biological factor is still a major constraint in that a heifer calves at two years of age and then her first offspring is ready for harvest at the age of 15 months. Thus, it takes about three years to place a fed animal on the rail after making the decision to retain a heifer. Current availability of feeder cattle is being restricted by a small cow herd and reduction in heifers entering the feedlot.

Federally inspected heifer slaughter through the middle of May is down 7.6 percent relative to the same four and a half months one year ago and down 13.8 percent relative to the same 19 week period in 2013. This is an extremely large reduction which points towards cattle producers aggressively retaining heifers to grow the beef herd.

The herd is not necessarily growing by leaps and bounds in the Southeast but the herd is expected to continue expanding in the Southern Plains region as well as Kansas and Missouri. Similarly, federally inspected beef cow slaughter is down 15.6 percent through mid-May compared to the same time period one year ago and 25.5 percent lower than the same time period in 2013.

The take home to the female slaughter data is that continued heifer retention will continue to tighten near term feeder cattle supply, but the increased heifer retention and the slower marketing of mature cows will bring a boon of feeder cattle on the market in the next couple of years.

ASK ANDREW, TN THINK TANK: Morgan in Ooltewah asks, “How late can you cut a field with fescue, orchard grass and clover for hay forage and still get the best protein content.” This question is probably best for Gary Bates, but I think I can shine some light on it. Hay quality is significantly impacted by the stage of maturity when harvested and this time period can change slightly from year to year depending on weather and forage development. In order to balance yield and quality, it is generally best to harvest these forages at boot to early flowering stage for the first cutting. Inclement weather can impact the timing of hay harvest to the detriment of quality. Many uncut cool season grass hay fields are fully seeded. If harvested for hay, these fields will likely yield well but the protein, energy and digestibility are likely to be inadequate for most classes of cattle and require supplementation. Producers are encouraged to conduct a hay analysis so they can prepare for winter feeding supplementation. The failure to provide adequate nutrition to cows can result in significant financial losses from failure to rebreed, rearing a poor calf, or not reaching full growth potential. 

Please send questions and comments to agriff14@utk.edu or send a letter to Andrew P. Griffith, University of Tennessee, 314B Morgan Hall, 2621 Morgan Circle, Knoxville, TN 37996.

FRIDAY’S FUTURES MARKET CLOSING PRICES: Friday’s closing prices were as follows: Live/fed cattle –June $152.83 -0.40; August $150.58 -0.88; October $152.38 -0.63; Feeder cattle - August $221.90 -0.68; September $220.50 -0.55; October $219.10 -0.48; November $217.75 -0.08; July corn closed at $3.61 down $0.03 from Thursday.