MANHATTAN, Kan. — Fed cattle prices collapsed in late September, increasing losses at western feedlots that paid record prices for feeder cattle this year. Those lower fed cattle prices translated to lower prices for fall feeder calves at feeder markets nationwide.
One small bit of good news for cattle feeders is the lower costs of gain. The projected cost of gain for cattle placed in Kansas feedlots in September was $82 per cwt. of gain for steers and $85 for heifers, according to a monthly analysis published by Kansas State University.
This is a 7 percent decline in feed costs since January. It continues the trend in lower feed costs since a $97.50 average cost, per cwt. of gain, at the beginning of 2014. But lower feed costs came nowhere near offsetting a sharp decline in fed cattle prices. "We were already looking at feedlot losses this year," said Michael Langemeier, Purdue University. "So when cattle prices dropped in September, it was downright ugly."
Using data collected by Kansas State, Langemeier estimates feedlots lost an average of $350 per head for cattle sold in September. He said it is the largest monthly loss for cattle feeders since 2009. The reason is, feedlots paid high prices for backgrounded cattle to maintain capacity.
"What really caused this red ink was feeder cattle prices were just too high in early and mid-2015," said Langemeier.
There has been some upward price movement. The five-area steer price for the week ended Oct. 9 was $125.35 per cwt. – about $40 lower than a year previous. Prices moved back into the low $130s by Oct. 16. The USDA price projection for fed cattle in 2016 is $136-$147.
Fed cattle price drops pressured feeder cattle markets. "Backgrounded cattle, those weighing 700 and 800 pounds, those prices have plummeted," said Langemeier.
For the week ended Oct. 5, seven- and eight-weight feeder cattle ranged from $181-$197 in Montana, Oklahoma and Nebraska markets.
Prices were lower in Eastern Corn Belt feeder cattle markets. Since Oct. 5, feeder cattle prices have increased nationwide.
"Feeder prices had finally fallen to a point where replacing feeder cattle became attractive to buyers," said USDA market news reporters on Oct. 16, at St. Joseph, Mo.
Prices for lighter feeder calves, 500-600 pounds, fell below $200 per cwt. in western markets by the end of September. Kentucky and Tennessee markets last week reported prices in the $180s-$190s for 500- to 600-pound calves.
The rise in fed cattle prices does strengthen feeder cattle prices. But cow-calf producers in the Eastern Corn Belt should be prepared for winter and spring feeder prices closer to historical averages. "Returning to the feeder prices we saw earlier in 2015 is not going to happen," said Langemeier.
