After several months of reluctance to place cattle, feedyards began filling up during October and November.
Nationally, October placements increased 12 percent over those during October 2006. And reversing a trend in place all year, placements showed year-to-year increases in all weight categories, with the largest numbers of cattle moving to feedyards in the lighter weight classes.
A big part of the reason for the increased placements is a shortage of winter forage in several areas. Much of the Southeast remains under severe drought, and wheat pasture is scarce across the Southern Plains. In mid-November, the Texas Cattle Feeders Association reported that large numbers of feeder cattle originally destined for wheat pasture were being shipped to feedyards, as high wheat prices and dry conditions drove wheat producers to protect their grain yields.
In spite of aggressive placements during October, U.S. feedyard inventories as of Nov. 1 were 2 percent below those of one year earlier, thanks in part to October marketings that ran 6 percent higher than last year.
The outlook for the fed-cattle market is positive, with prices in the high $90s likely later this winter and into spring, but high feed prices will make for tight margins on all those cattle placed this fall. In mid-November, USDA revised its estimate of this year’s U.S. corn crop to 13.168 billion bushels, down about 1 percent from the October estimate of 13.318 billion bushels. Slightly lower yields account for the lower estimate, with the average yield listed at 153 bushels per acre.
Even though the estimated harvest remains 25 percent higher than last year’s crop, corn supplies are likely to be tight due to export demand and ethanol production. So based on the lower production estimate, USDA increased its estimated average corn price by 30 cents for the 2007-2008 marketing year, with a midpoint estimate of $3.50 per bushel. The agency also raised its estimated average soybean meal price by $15 per ton to a midpoint of $250 per ton.
U.S. hay prices, meanwhile, have reached record levels, according to the Livestock Marketing Information Center. For the 2007-2008 hay-crop marketing year, the national average hay price is forecast to be about $130 per ton, well above last year’s record of about $110 per ton. The high prices come as a result of tight supplies, strong demand and those high prices for corn, soybean meal and other feedstuffs.
A piece of good news that should help support fed-cattle prices into next year is that beef exports have increased significantly. From January through September, beef exports were up more than 26 percent from the same months last year.
Wholesale beef prices showed some strength during November, increasing from a low around $138 per hundredweight for the Choice cutout at the beginning of the month to over $148 by Thanksgiving. Continued improvements in beef prices into this winter should keep packer buyers active, support the fed-cattle market and help feedyards keep inventories current.