Heavier carcasses weigh on prices

Cash calf and feeder cattle prices returned to near-record levels in May as buyers scrambled for dwindling supplies.

USDA’s Economic Research Service (ERS) increased this year’s expected annual average feeder steer price (750-800 lbs., Oklahoma City) by $1, compared to the previous month’s forecast, to $255.46/cwt., in the May Livestock Dairy and Poultry Outlook. Prices increased in the second quarter by $5 to $255 and by $2 in the third quarter to $263. The average fourth-quarter price was reduced $3 to $264. Price increases in the second and third quarters assume adequate forage supplies and declines in forecast corn season average prices. The 2025 feeder average steer price forecast is $259.00. 

Demand continues to be boosted by positive grazing conditions in many parts of the nation.

“Conditions at the beginning of the 2024 forage growing season suggest that producers may be able to plan grazing and hay production with less restriction compared to recent years,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his recent weekly market comments. “However, in many cases, pastures and ranges still need time to recover from extended drought conditions.” He points out there is currently less drought in the U.S. than at any time in the past four years.

Nationally, for the week ending May 26, 48% of the nation’s pasture and range was rated as Good or Excellent versus 43% the same week a year earlier, according to the latest weekly Crop Progress report. The only key cattle states with 35% or more rated as Poor or Very Poor were New Mexico (59%) and Texas (38%).

“There is reason to be cautiously optimistic for better cattle production conditions in 2024,” Peel says. “However, the forecasted redevelopment of La Niña conditions this summer is worrisome. The seasonal forecast from the Climate Prediction Center is for above average temperatures and below average precipitation for the next three months in much of major beef cattle country. Proceed with caution.”  

More pounds-fewer cattle

On the other side of the fence, contra-seasonally heavier carcass weights borne by slower packer production are increasing tonnage and capping cash fed cattle and wholesale beef price potential.

Although marketings for feedlots with 1,000 head or more capacity were 10.1% more year over year in April, according to the latest Cattle on Feed report, Peel explains daily average marketings were about the same year over year when adjusted for the two extra marketing days in 2024.

“April marketings were 15.8% of the April 1 on-feed inventory, the highest monthly rate since August 2023,” Peel says. “Nevertheless, the average marketing rate over the past 12 months remains historically low. Marketings in the first four months of this year are down 0.6% year over year.” 

Compared to the previous month, ERS increased estimated beef production for this year by 140 million pounds to 26.6 billion pounds in May’s World Agricultural Supply and Demand Estimates (WASDE). Through the last week of May, year-to-date estimated beef production was just 2% less than the same period a year earlier, which was significantly more than originally anticipated. Projected beef production next year of 25.1 billion pounds would be 1.5 billion pounds less (-5.5%) than this year.

ERS reduced the forecast average five-area direct fed steer price for this year, in the May WASDE. Based on recent data and an anticipated faster pace of marketing in the second half of the year, prices were reduced $1 in the second quarter to $184/cwt., $2 in the third quarter to $182 and $3 in the fourth quarter to $187 for annual average price of $183.51, which was $1.49 less than the previous month’s estimate. Next year’s average price was forecast at $188 on expected tighter cattle and beef supplies.

Weaker projected cattle feeding returns

Assuming no price risk management, cattle feeding returns are projected to be negative from June to the end of this year, according to the most recent Historical and Projected Kansas Feedlot Net Returns (KFNR) from Kansas State University.

For June through December, projected net returns for steers range from -$47.99 per head in July to -$259.78 in September with feedlot cost of gain ranging between $109.91/cwt (June) to $116.34 (Dec.).

Similarly, projected net returns for fed heifers during the same period range from -$2.74 per head in July to -$176.38 in Sept. with feedlot cost of gain ranging from $119.20/cwt. (June) to $127.79 (Dec.).

Based on the KFNR, analysts with the Livestock Marketing Information Center (LMIC) say, “The number of days on feed for a steer was reported at 206 days in April, which is up 25 days from 181 days in January. A year ago in April, the number of days on feed for a steer was 190. The number of days on feed for heifers increased from 178 days in January to 191 days in May, compared to 170 to 186 days during the same period last year.”

LMIC analysts add the increased number of days on feed and a decrease in average daily gain since the start of the year have resulted in more pounds of feed per pound of gain.

“Year-to-date through April, the pounds of feed per pound of gain for steers has averaged 6.8 compared to 6.4 last year while heifers have averaged 7.2 versus 6.8 last year, LMIC analysts explain,” in the latest Livestock Monitor. “Although pounds of feed per pound of gain have increased this year, feed costs have averaged $125 and $133/cwt. respectively, for steers and heifers, a decline of 15% and 16% compared to last year.”

For ADG perspective, LMIC analysts say it is less year over year and less than the five-year average through the first four months of this year. For steers, they explain steer ADG declined to 3.14 lbs. in April from 3.41 lbs. in January. For heifers, ADG declined from 3.03 lbs. in January to 2.89 pounds in April.