Cattle feeding industry has bright outlook for fall

Record-low cow numbers and increased beef demand have led to an optimistic feeding season and fat cattle market this fall.
“I think the beef industry is in a position where we’re going to see strong fat cattle prices. Our supply of cattle is going down to levels of brood cows we haven’t seen for 40 or 50 years. Because of that, fats will stay strong,” says Chappell Feedlot owner Tom Williams of Chappell, Neb.
“Feeding this year, whether it’s retained ownership, or just feeding in general, looks positive as we’re short on numbers of cattle, and especially yearling cattle coming off grass,” adds owner and manager of Darnall Feedlot Gary Darnell of Harrisburg, Neb.
Darnell adds that in recent weeks he sold fat cattle for $95 per cwt. “For August, that’s a very good price. Demand is equal to or even a little better than the supply. I’m encouraged that the fat cattle market will be even better this fall.”
“The general demand for beef is good, hence the demand for feeders is good, to the point that now it’s hard to buy a calf or yearling at a break even on the board. It’s tougher on the margin people at the moment,” notes Williams.
“We’ve had a couple years prior to this one where there have been some pretty devastating losses on both the margin and live side. I think we’ve turned a corner now with the supply and demand we have in the cattle market, and we’re looking at positive margins going forward. I would encourage those ranchers that retained ownership to look at the futures market,” says Darnell.
“It reflects that we’re looking toward a good fat market when feeders are willing to pay a little more for cattle than you can hedge them for on the board – that looks bright,” adds Williams.
Darnell adds that while both calves and yearlings are in short supply, he thinks, of the two, yearlings may be in shorter supply.   
“It will depend on how many calves are for sale, but the calf supply is a little more vulnerable depending on what ranchers decided to do with theirs. Some will go to grass and others will be retained as replacements, so we don’t know how many will be for sale this fall. Yearlings are higher than calves at this point,” notes Darnell.
“Based on the Aug. 12 video auction, I would say feeder calves and grass fed yearlings are almost equal. It appears to be dictated more by who needs what. We’re involved in several different programs, including natural, age and source and conventional programs. If packers are getting orders for one program more than others, they will pay more on that day. There are some options there that can be worth quite a bit of money on calves or yearlings. But, a natural yearling will bring more than a natural calf, because you have a lot more risk of fallout with calf than with a yearling,” comments Williams.
Both men note that worldwide impacts on the feed industry are causing corn prices, and cost of gain, to increase.
“Cost of gain is directly related to grain or grain by-product prices and we’ve seen those increase in the last three weeks. A lot of that is in sympathy with the drought-related wheat losses in Russia and the flooding in Europe,” says Darnell.
“We’ll probably feed four-dollar corn this year. Two months ago, things were more mid-threes and even low twos, but today corn is over four dollars,” adds Williams. “Corn is going up and will probably continue to stay high, based on the global grain situation. That, in turn, keeps the fat cattle market strong from that standpoint. At least on the board.”
“Prices are good, and the ranchers need that and we’re excited they’re getting it. In most cases we can buy those feeders and make a good return on our investment feeding them out right now,” notes Darnell.
“If our economy continues to improve, our beef demand will stay strong,” adds Williams.
Heather Hamilton is editor of the Wyoming Livestock Roundup and can be reached at heather@wylr.net.