A Few Thoughts by John Nalivka: A look at carcass weights
The beef industry has changed significantly and in a positive way since cattlemen liquidated herds to a 60-year low at the beginning of 2014 with the most apparent benefit to carcass grade. For the past 16 months, fed cattle have graded 85 percent Choice or higher with the five-year (2015 – 2019) average at 82 percent. This compares to an average of 73 percent from 2009 – 2014.
No, I haven’t gone astray from my topic of this article. Let’s go back and review what was happening in the feedlot during that period when the carcass grade was sharply improving. Feeder cattle were priced into feedlots at $210 – $250 / cwt in second-half 2014 through first-half 2015. Breakeven prices for cattle marketed during 2015 ranged from $150 – $170 / cwt. At the same time, steer prices were falling sharply. From late 2014 to late 2015, prices fell from the $170s / cwt to the $120s /cwt. taking feeding margins from $275 in the black to $580 in the red!
So, on to the topic at hand. We all remember when cattle weights (carcass) hit record highs in 2015 as cattle feeders held cattle in an attempt to lower break-evens (cost ÷ weight = BE). By fourth-quarter 2015, steer carcasses were hovering around 930 pounds while heifer carcasses were pushing just over 850 pounds While we are not there yet, weights have risen significantly this year and well above a year ago when feedlots were very current as fed cattle prices were strong against cattle numbers that were relatively tight. This is not the circumstances this year with increased available supplies and lower fed cattle prices.
So, are there problems brewing? I do offer a word of caution. Steer weights have risen to record levels for this time of year and there are 6 percent more cattle in the country than there was in 2015. In addition, cattlemen are liquidating herds with 13 percent more cattle on feed than at the beginning of 2016. Heifers are accounting for a large share of current on feed inventories.
While I caution against weights moving back to those seen in 2015 – 2016 as that can be a significant contributor to increased production, there is one significant factor to consider in this analysis – breakeven prices for cattle placed on feed. They are hovering in the range of $110 – $115 and they need to stay in this range to protect feeding margins. I am optimistic about the market improving as the year progresses, but there is still a degree of uncertainty. Consequently, managing breakeven prices and risk are a high priority.
Support Local Journalism
Support Local Journalism
Readers like you make the Tri-State Livestock News’ work possible. Your financial contribution supports our efforts to deliver quality, relevant coverage of the livestock industry.
Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.
Each donation will be used exclusively for the development and creation of increased news coverage.
Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User