Negotiated cash fed cattle trade was at a standstill in all major cattle feeding regions through Monday afternoon, according to the Agricultural Marketing Service.
Live prices were generally $1-$3 lower last week at $108-$111/cwt. Dressed prices were $1-$4 lower at $172-$174.
The average five-area direct fed steer price last week was $109.52/cwt. on a live basis, which was $1.75 less than the previous week and $14.51 less than the same week last year. The average dressed steer price of $173.06 was $2.73 less than the prior week and $25.98 less than the prior year.
Futures and equity markets were closed Monday in observance of Martin Luther King Day.
Choice boxed beef cutout value was $2.12 higher Monday afternoon at $215.04/cwt. Select was $2.76 higher at $205.84.
“As high feed prices push feedlot cost of gain up, feedlots have an incentive to buy more pounds and place heavier feeder cattle,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “Thus, the cattle industry responds to corn market signals to use less corn by placing cattle at heavier weights and using other (i.e. forage) feeds to add additional weight to cattle prior to feedlot placement. This is the advantage (and necessity!) of the cattle industry to use the ruminant capabilities of cattle to respond to the corn market situation. If all the cattle finished in feedlots in 2021 (that would have been fed anyway) are placed, say, an average of 100 lbs. heavier, the amount of reduction in total concentrate feed use is significant.”
Peel provides context for the extraordinary climb in feed costs—demand rationing—using cash corn prices in Dodge City, which averaged $3.41/bu. from January through September of last year. The price was more than $4 by mid-October and at $5.44 in mid-January.
“When feedlots demand heavier cattle, prices for lighter weight feeder cattle will decline relative to heavier cattle,” Peel explains. “For example, the price of 825 lb. steers in Oklahoma is currently about $131/cwt. When corn is, say, $3.65/bu., feedlots would be willing to pay roughly $155/cwt. for a 575 lb. steer, based on the cost of gain to put on the 250 lbs. from 575 to 825 lbs. When corn price increases to, say, $5.35/bu., the increased cost of gain means that the feedlot would only be willing to pay roughly $146/cwt. for a 575 lb. steer, even though the price of the 825 lb. steer has not changed. Of course, higher feed prices likely also means that the overall feeder cattle price level will decline as well.
“The change in feedlot demand for light versus heavy weight feeder cattle simultaneously provides incentives for stocker producers to add the needed additional weight to feeder cattle. In the example above, the value of stocker gain is roughly $0.75/lb. when corn is $3.65/bu. but increases to $0.97/lb. when corn price increases to $5.35/bu.