Thirteen billion bushels of corn can change a few minds. That seemed to be the trend as movement into feedyards picked up this fall. Other forces are at work, of course, including short supplies of forage in many areas and a generally favorable outlook for fed-cattle prices this winter and next spring.
But as the picture improves in terms of grain supplies, feedyard placements and inventories, particularly of cattle in the heavier weight classes, have grown. While the resulting outlook for larger beef production this winter has dampened some expectations for $100 fed cattle, prices should remain strong and finish the year in the mid $90s.
October’s Cattle on Feed report showed placements during September totaling 2.4 million head, an increase of 9 percent over September 2006. September marketings, at 1.7 million head, lagged behind placements and fell 3 percent behind last September. Feedyard inventories as of Oct. 1 were 4 percent lower than one year earlier.
Following a trend in place for most of the year, heavier cattle accounted for the increase in placements. For cattle weighing 700 pounds or more, September placements increased 17 percent over last year. At the same time, feedyards placed almost 16 percent fewer cattle weighing 600 pounds or less than they did during September 2006.
As long as they can find the necessary forage supplies, most owners will continue to avoid placing lightweight cattle into feedyards, as corn prices remain high in spite of the big crop. In mid October, USDA projected a corn-price range for the 2007-2008 marketing year of $2.90 to $3.50 per bushel. The midpoint of that range, at $3.20 per bushel, would be about 16 cents higher than the average for the 2006-2007 market year. Early speculation suggests farmers will plant less corn acreage next spring due to the high price of soybeans and other crops, leading to higher corn prices.
Short supplies of forage in winter-grazing areas could force some cattle into feedyards earlier than owners prefer. Wheat-grazing opportunities in particular appear limited, as dry weather at planting time, coupled with seed shortages, resulted in smaller planted acreage. In addition, high wheat prices, which USDA projects at $5.80 to $6.40 per bushel for the 2007-2008 market year, will encourage growers to make grain yields their top priority.
Growth in beef exports should help support cattle prices as beef production increases. USDA reported last month that 2007 beef exports through the end of August increased more than 25 percent in volume and 28 percent in value compared with the same period last year. Gradual but significant recovery of exports to Japan have accounted for much of the increase.
Retail beef prices averaged $4.23 per pound in September 2007, according to USDA. That’s an 8 percent improvement over September 2006, and third-quarter prices averaged $4.18 per pound. The agency projects fourth-quarter prices to average $4.08 per pound based on supplies of competing meats and seasonal demand trends.