There is currently considerable focus on growth of the U.S. and regional beef cow herd, with many producers and market analysts closely watching cull cow slaughter rates and bred female demand. Additionally, there have been a lot of comments from local auction markets all over the country that heifers suitable for breeding replacements have been bringing as much as similar weight steers. In this week’s Cattle & Corn Comments, we’ll examine recent replacement heifer premiums in South Dakota auction markets.
Table 1 shows the prices for several weight classes of feeder steers, feeder heifers, and replacement quality heifers as designated and reported by USDA Agricultural Marketing Service (AMS). These prices are the combined weighted average auction market results from about seven markets across South Dakota for the week before Thanksgiving for each of the last three years. Prices have increased to record, or near record prices, this fall and are about $20/cwt higher for the weights of calves reported in Table 1. Of interest and focus here, though, are the spreads, or premiums, of feeder steers compared to feeder heifers and the difference between replacement quality heifers and feeder heifers, which are shown in the last two columns of the table.
First note that feeder steer prices are more than $20/cwt higher than feeder heifer prices for 450-549 lb calves this year. The feeder steer to feeder heifer spread was $17-18/cwt for 550-649 lb calves. These spreads are $2-6/cwt larger than they were a year ago. That the feeder steer to feeder heifer price spread is higher is interesting, and doesn’t support an increase in replacement heifer demand. As replacement heifer demand increases, fewer heifers are sold for feeding purposes, thereby reducing the supply of feeder heifers. This tightening supply of feeder heifers would result in stronger prices for the heifers relative to steer prices.
A better gauge of replacement heifer demand, though, is to examine the premium paid for replacement quality heifers relative to similar weight feeding quality heifers (last column of Table 1). As shown, the replacement heifer to feeder heifer premium was almost $10/cwt for 450-499 lb and 600-649 lb heifers and about $15/cwt for 500-599 lb heifers. For the lightest and heaviest heifers in Table 1, this premium is $6-9/cwt less than last year. But, for the 500-599 lb heifers, the replacement quality premium is almost $5/cwt higher than in 2012. With producers more focused than ever on replacement heifer development, the 500-599 lb heifers likely represent the ideal or optimum weight to begin with now to be bred early next summer.