It seems like one step forward, two steps back every time the fed-cattle market tries to post some gains this spring. The market continues to fight demand challenges and aggressive cow slaughter in the dairy sector, causing prices to linger in the low $80s, nearly $10 per hundredweight below those of one year earlier.
On the bright side, feedyard performance has been good, cost of gain has declined somewhat, and with lower feeder-cattle prices, breakevens on cattle placed early this spring suggest some profitability could return to the feeding sector in coming months.
With a fairly mild and dry winter across much of the Plains feeding region, cattle reportedly have performed well. According to Kansas State University’s Focus on Feedlots survey, steers in participating feedlots posted daily gains averaging 3.62 pounds per day during January, compared with 3.44 pounds during January 2008. Heifers gained 3.38 pounds per day, compared with 2.98 pounds one year earlier. Steers closed out in January required four fewer days on feed than those shipped during January 2008, and time on feed for heifers declined by 23 days. Slaughter weights were up in spite of the shorter time on feed, while feed efficiency also improved.
Cost of gain for January closeouts remained high, at almost $90 per hundredweight for steers and $92 for heifers, $15 and $14 higher, respectively, than one year earlier. But with the price of grain and other inputs lower, the report projects cost of gain for steers placed during February to average $71.50 per hundredweight.
Beef production, meanwhile, continues to lag, and the supply picture suggests prices should improve with any uptick in demand. By late March, steer and heifer slaughter was running about 2 percent behind last year, but dressed weights are up from last year, leaving total beef production for the first three months of the year about 1 percent behind that for the same period in 2008.
Supplies should continue to tighten, as USDA’s March Cattle on Feed report showed March 1 inventories down 5 percent from one year earlier. Placements during February, at 1.68 million head, were down 3 percent from February 2008. Feedyards marketed that same number of cattle during February, and while the monthly total was down 5 percent, the daily average with one fewer marketing day was about equal to that during March 2008.
Those tighter supplies, coupled with the onset of grilling season, should support prices this spring, again depending on how the demand picture shapes up.
Beef exports continue to offer some good news in a down market. According to the U.S. Meat Export Federation, January trade defied negative expectations as beef muscle-cut exports jumped 13 percent in volume to 96.9 million pounds and 15 percent in value to $186.5 million compared to the same time period last year. Gains in Japan and Korea accounted for much of the increase, as exports to Mexico and Canada have declined.