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Measuring supply??

I have thought, over the years, that the fat cattle price was a good indicator of grain supply.  Is the rise in fat cattle price any response to anticipated feed costs or more an indicator of low cattle numbers and new export business?

 

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Re: Measuring supply??

Fat cattle are priced like they are for a couple of reasons.  We have the smallest cow herd since the early 50's.  Also, we tend to export more meat when grain prices are high.  Considering we have the second largest supply of beef and pork in cold storage since records have been kept, one could also say demand has drastically stalled domestically.  If you want to measure grain supply or rather costs of grain in terms of what it does to fat cattle, you need to look at the dressed weights.  When feedlots are losing money due to grain prices, they turn cattle a lot quicker meaning they feed them to smaller weights.  When grain prices are low enough compared to fat cattle prices, feedlots tend to feed to heavier weights.  Looking at the weights of both pork and cattle, grain prices are cheap enough to feed to heavy weights which is what we're seeing.  Technically speaking, the live cattle market is breaking.  We are witnessing lower highs and lower lows.  Personally, I think this has to do with domestic demand.  If there was ever a winter for high demand for meats, it was this year as it is said to have been the third or fourth warmest on record.  With cold storage levels where they are at, it implies domestic demand just isn't there.  Combine high meat prices with high gasoline prices and one has to give.  People can easily and readily change their diet, but they can't really do much to change their automobile's diet.   

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Re: Measuring supply??

Are these assumptions or have you run the numbers? I kind of like to see numbers when possible.

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Re: Measuring supply??

Thanks Gored,

A thoughful answer.  Fat cattle have always seemed like a more controlled market, but I obviously don't fully understand it or I wouldn't have asked.

 

Palouser,  The low cattle numbers is right, I think. The second comment about the export of meat being high when grains are high------I am studying.  It seems to me that exports are a larger portion of consumption than in years past.  Maybe just a logistics thing.  And we may have more processing capacity to facilitate it.

 

Gored, The feeding analogy,---------I have noticed that over the years and appreciate the discussion, but the low numbers may also be affecting finish weight.  What do you think?

And the breaking price---------may have a lot to do with a mild winter.  Effeciency had to be great this winter----well sort of winter.

Demand still has a lot of cattle on feed.  I expected lots to thin down by spring, but not so far--------the one's I see.

 

I noticed two large lots this weekend locally feeding a large % of holstein.  With corn at 6.50 to 7.50 to the lot.  That is an long expensive feed.  Why?  Are the #s that low?

 

Thanks again.

 

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Re: Measuring supply??

Actually, the low numbers have little to nothing to do with finished weights.  One must remember we had a pretty small calf crop during the 2008 feeding season.  A lot of lightweight cattle hit the market in 2008 because of the amount of money feedlots were hemorraging per head.  The last 150-200 pounds to put on a feedlot steer or heifer are the most expensive because the conversion is the worst.  When cost of gains are lower than what fat cattle are worth, a lot of feedlots including my own will feed cattle up to 1400 pounds.  When the cost of gain is higher than what fat cattle are worth, most feedlots move them in the 1100-1200 pound range. 

 

Efficiency has been great this winter.  I would venture to guess I'll be shipping fat cattle two to three weeks earlier than normal this year.  I don't think the breaking of the price has much at all to do with the mild winter.  In fact, one could easily assume demand would be higher for meat in a mild/warm winter opposed to a cold winter due to many available days of grilling.  I know my family grilled outside several days this winter where normally we do not.  The overall economy has a lot to do with the breaking of the price.  The longer and higher gasoline prices climb will have a negative impact on meat prices. 

 

Some feedlots just feed a large number of holsteins.  They can buy them much cheaper.  I guess the question about the two large lots you saw is whether they normally feed a larger pecentage of holsteins or not.  Holsteins do take longer to feed, and they don't convert as well.  However, there is definitely a market for them.  There's a lot not far from me that traditionally feeds 80+ percent holsteins.  Someone every year has to feed holsteins regardless of whether numbers are low or high.