Feed Lot

FEB 2018

Feedlots and cow/calf operations in the beef industry who feed 500 or more has annually on grains and concentrates; maintain 500 or more beef cows; backgrounder, stocker/grower, preconditioner; veterinarian, nutritionist, consultant

Issue link: https://feedlotmagazine.epubxp.com/i/934116

Contents of this Issue

Navigation

Page 9 of 31

Cattle markets in 2017 brought back a sense of stability, if that's not too obtuse in a business fraught with uncertainty. The year began with ambiguous tension, un- folding weekly for marketers made wary by three preceding years of tumultuous price swings. Anyone with a stake in the game felt the pressure of risk rooted in the un- certainty of just how good the mar- ket could be, or how bad. As it turned out, fed cattle values held together quite well under fur- ther industry expansion and larger cattle supplies. No tremendous highs were reached, but the early May fed-steer price of $144/cwt. was a seasonally appropriate high- light, $8/cwt. higher than the prior year's annual high notched in March. On the bottom side, August brought on the dog days of summer, a $104/cwt. lower boundary—and relief that it didn't touch the dread- ed chasm "south of $100." In fact, that boundary held $7/cwt. higher than the 2016 lows in October. Higher highs and higher lows for the fed cattle complex were con- siderable wins for the feeding sec- tor in a year that saw the harvested head count increase by 5.2%. The weekly steer/heifer average, at nearly 490,000 head, was up 24,400 from the 2016 average but partially offset by lighter weights. Steers carcasses came in 14 lb. lighter on the year while heifers were 11 lb. lighter, those declines effectively reducing tonnage by the equivalent of 7,330 head per week. Even so, the net-effect weekly increase still added up to 17,000 head. Tracking packer profitability through 2017 was easy because those companies maintained posi- tive margins virtually all year. While forced to advance cash bids beyond their sold-ahead product values in the spring, the rest of 2017 saw packers leading the produc- tion chain in leverage and profits. A key element of packer prof- itability favoring all production sec- tors was the fact that those firms were willing to maximize produc- tion much of the time. This, while industry capacity to harvest cattle had declined in previous years un- der smaller cattle numbers, only to be met with the current expansion phase and larger fed cattle availabil- ity. Currentness and throughput of market-ready fed cattle kept prices higher than some expected, partic- ularly in the 3rd and 4th quarters, anticipated trouble spots with a po- tential glut of fed cattle. The cattle feeder's share of wholesale beef values varied wide- ly in 2017 with a magnified "lever- age shift" from the first half to sec- ond half of the year (see graph). January kicked off with wholesale beef prices depressed, returning a comparatively larger proportion of wholesale boxed-beef value to cat- tle feeders than they'd seen in a year. This developed as 1st-quarter "sold ahead" orders were strong at the packer level but supplies of market-ready cattle tightened at the transition to the 2nd quarter. Feeders enjoyed the supply void as packers scrambled to find cattle with enough days on feed to reach the Choice and Prime grades along with enough Certified Angus Beef ® (CAB ® ) branded product to fill their commitments. Grid premi- ums soared as the Choice-Select spread ranged from $20 to $25/cwt. in May and early June with CAB premiums touching $14/cwt. at the top of the reported range and a USDA average of $6.43/cwt. the week of June 19th. The situation evolved as June and July fed supplies increased and a seasonally expected stronger marbling trend returned quality grade levels higher. That satisfied the demand side more readily, though still not tempering the qual- ity premium spreads until August. With the fortified cattle supply and flow of Choice-and-higher product offering, the fed cattle price com- plex followed a seasonal pattern into the fall. From early July through mid-Oc- tober, Choice and Prime grading rates in packing plants began a push to outpace 2016's historically high levels by a combined 3 percentage points for the extensive period. In somewhat related news, Oc- tober brought about a USDA an- nouncement that adjustments to en- hanced camera grading equipment were necessary in some packing plants to realign the latest technol- ogy with Choice, Premium Choice and Prime grading thresholds. Ini- tial impacts became clear in early November as the U.S. average per- centage for Choice dipped to 68%, well below the 72% range seen both a year ago and just weeks prior. Final tweaks to those changes saw the packing plant average quality mix improve into the end of the 4th quarter with the Choice per- centage matching a year prior at 71%. Prime landed at a historic 7% of the fed cattle offering through- out December. These quality trends were not without influence on the Certified Angus Beef ® brand, since insuffi- cient marbling (below Premium Choice) is the prevailing factor most responsible for exclusion of eligible carcasses under the brand's 10 carcass specifications. Even so, fiscal 2017 data logged sales at 1.12 billion pounds, a 10.4% jump, and the 11th straight year of record sales volume for the brand through licensed partners domes- tically and abroad. By late November, the weekly CAB acceptance rate rose again to meet the recent annual average, right at the top of the range in the brand's 40-year history. Availability of eligible cattle looks bright as the share of fed steers and heifers 10 FEED•LOT  February 2018 2017: A Relatively Stable Interlude The year saw strong demand, increased harvest numbers and a large quantity of premium cattle FEEDLOT FOCUS By PAUL DYKSTRA, PH.D. CERTIFIED ANGUS BEEF

Articles in this issue

Archives of this issue

view archives of Feed Lot - FEB 2018