Prices Are Getting Better
I have written recently about rising cattle prices and the reasons why they seem to be staying positive, but in the articles and newscasts I’m seeing on the subject now, I get a little spooked. We all know how one terrible bit of news could ruin the good news. I’m trying not to be negative, but cautious.
I keep seeing reports of rising gas prices and input costs, and it makes me wonder if we’re gaining; but then I realize where we would be if beef prices and its demand were stagnant. So, I stop worrying about the unknown and look for better times.
At some point, producers are going to get moisture, higher prices and affordable inputs. I truly believe it, and you should too. We want the feeders to be involved on a positive track, also.
The beef market has really been positive the last couple of months. I’ve always figured a beef animal at any time is only worth so much, the question is who gets the biggest share, the producer, feeder or processor and retail seller.
As we all know, for the last few years, it was the processor who had unbelievable profits. We’re not against the packers making money, we are just against cutting the producer out of the process.
Rising cattle prices and declining wholesale beef prices have shrunk the record packer margins of the last couple years down to around $21 per head, a huge percent less.
But it doesn’t stop there, the feeders are seeing an average profit of $58 per head for the week ending Oct. 1, down around seven dollars per head from the previous week based on the average five-area steer prices of $145.25 per hundredweight. The breakeven for cattle placed on feed last week was up from the week before.
According to the Sterling Beef Profit Tracker, the average cost of feeding a steer to finish weight was 15 percent higher for cattle marketed last week.
According to CattleFax, fed cattle prices, less the drop credit, has moved from 48 percent to 53 percent of the spot Choice-Select blended cutout since the first of August. As a result, packing margins have declined by over $200 during that period and are now below $100 per head for the first time since pre-pandemic.
The U.S. Department of Agriculture reported supply on feed over 150 days on Sept. 1 was the second largest on record for the month. CattleFax reported the more days on feed are largely a function of lighter weight, drought-forced placements.
CattleFax estimated pre-pandemic packer capacity at roughly 98,000 head per day. The packer has not only shown capacity for larger harvest levels, but willingness to utilize it.
Here we are. Large demand, especially for Prime and the upper two-thirds Choice product, along with reduced cattle grading percentages has also resulted in a packer active in the market, especially in the Northern regions. Some say these prices and demands will continue to rise steady into 2023 and beyond.
The future looks good to take advantage of those prices, especially for quality cattle with good genetics and a good reputation.