Much of the wheat pasture in the Southern Plains is deteriorating as the drought continues. As a result, feeder cattle prices have slipped somewhat recently and are well below their February-March 2012 highs. Lightweight calf prices remain slightly above year-earlier prices, while heavier-weight feeder cattle prices are lower by about the same dollar amounts. Pressure on prices is mounting as the wheat pasture deteriorates in the Southern Plains and as cattle feeders continue to register negative profit margins due to high feed grain prices, which are not expected to decline until late in 2013 when new-crop corn is harvested.

Cattle feeders are caught between high feeder cattle and feed prices and packers whose profit margins have been mostly negative since mid-2011. The Cattle Buyers’ Weekly observed that during 2012, at least one feedlot closed, some pen space was reportedly reallocated to growing space, and one-time feeding capacity declined in 2012 by almost as much as it had increased in 2011.

Heavier weights offset reduced slaughter
Beef production is projected to be higher year-over-year for the fourth quarter of 2012, largely due to heavier dressed weights and despite lower projected year-over-year quarterly cattle slaughter. While continuing above year-earlier levels, wholesale prices have slipped in recent weeks. This slippage—largely a seasonal phenomeno—-will likely cause packers to attempt to pressure fed cattle prices downward. The average Retail Choice beef price, at $5.15 per pound, was well above October’s price, setting a new record, and the All-Fresh beef price also set a new record at $4.81 per pound.