October 19, 2021








Cash Cattle


There was little to no trade on fed cattle Monday. Testing the marketplace is the purpose of bargaining over price points. Leverage defines the relative strength of the parties on each side of a transaction. Predicting when leverage will change is difficult, but understanding where the leverage has been for the past couple of years, is easy. Smaller show lists in most regions will provide some help to sellers but a large purchase last week combined with a small slaughter will benefit buyers. A small package of steers sold in Iowa at $125.


Prices closed steady to firm this past week with spots of sales $124.50-$125 but still the bulk of sales at $124 live and $196 dressed. Sales volumes were large in the north and smaller in the south.


The slaughter volume this past week fell from 657,000 head to 646,000 head. Friday was a light day with a couple plants dark for cooler cleaning. The daily and weekly slaughter volumes will be the mostly closely watched data in the beef trade. Holiday demand will be increasing in the coming weeks and the ability of the beef plants to respond will be key to satisfying the robust demand for beef. 


Cattle Futures. Futures prices were weak from cattle deliveries and a small weekly slaughter number last week. No new deliveries were posted Monday.


The Comprehensive Fed Cattle Weekly Report offers the most current information on the current status of fed cattle being harvested. The report is published each Tuesday and includes the previous week's change in carcass weights and quality grading. The latest report shows carcass weights up 9# at 888#. This is only 8# under last year. The combined steer and heifer weights can easily be influenced when the proportion of steers to heifers in the weekly slaughter changes. Quality grade grading was down .2% at 80.5%.


Forward Cattle Contracts:  Forward contracts will always bear some relationship to the corresponding futures month closest to the delivery month for the cattle. Basis levels will move up and down as processors want to add to forward contracts or not. Sometimes the forward contracts are associated with forward sales of beef and sometimes not. Packers may simply try to add an extra margin for taking the price risk off the hands of the producer. 


Weekly graphs on the Comprehensive Weekly Fed Cattle Report break down the categories of trade for the week according to 1) formula cattle; 2) negotiated live; 3) negotiated dressed; 4) and forward contracts. Some cattle included in the formula category are week to week negotiated grids and not committed cattle to one plant. Other cattle designated as formula are "over the tops" where packers purchase cattle at $1-2 over the highest price paid in any given region.


The Cutout. The boxed beef market softened in early week trading. Exports last week were below both the previous week and last year. The movement in box prices has narrowed the choice/select spread from $35 a couple weeks ago to near $20 cwt.. Some expect beef may find support as retailers begin to purchase inventory for the holiday season.


Weekly slaughter numbers have consistently reflected larger cow slaughter. There is little doubt the national herd is in liquidation mode and cycling lower. The year to date numbers have cow slaughter running 10% over last year and should the trend continue through year end, the year end inventory of cows might be expected to fall 2%. The irony is this is occurring amidst an increase in global demand for beef.






Choice CutoutChoice Price Change
280.88Up $0.79
Select CutoutSelect Price Change
261.53Up $1.72





Beef Feature Activity Index. Volatile beef prices are not the friend of beef special features in the supermarket. Extreme price fluctuations make it difficult to find a price point where businesses, both restaurants and retail stores can move large volumes of product at a known margin.



Replacement markets


August and September were heavy placement months when compared to prior year. October will likely fall back to a more normalized placement level although still the heaviest placement month of the year. Pasture gains for much of the southern plains are good and many cattle will move to the feedyard with heavy weights. 


Rains across much of Texas and Oklahoma will increase the likelihood of improved winter grazing. Those rains may fall late for dryland pastures from the Texas Panhandle north into Kansas. Grazing in the southeast has become more popular and stocker operators will turn out cattle all across the southern states. South and central Texas also will be turning out calves for winter grazing. Grazing rates have followed grain prices and in most areas have increased from .50/lb. to .60/lb. and higher.


The spreads between weaned and unweaned calves seems to widen every year. Temperatures in October on the southern plains can frequently vary from lows in the 40s and 50s to highs in the 90s. This presents a high risk environment for weaner calves and death loss risks are high. Combine temperature changes with dust from dry weather and you have a volatile mix. Medicine is expensive and labor is scarce. The end result is the sale of many calves weighing 350# to 550# of the same weight and quality at prices that are $50 cwt. apart.


Oklahoma City. -- Both feeder cattle and calves were trending higher. Rains across much of the area prompted improved demand for calves.


OKC West  -- Prices were mixed.


Feeder Cattle Futures. Feeder futures were lower as grain prices turned higher. Prices are now retracing the recent gains and moving back into the $150s.


Feeder Cattle Cash Index. The index is tracking the moves in cash prices.   


Forward cattle contracting. The forward contracting is currently developing a more traditional pricing structure. Prices into the spring on the futures is leveling and basis levels also are finding more historical levels. The many video auctions will market the lion's share of the nation's cattle offerings.


National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.   


Grain Futures. Corn prices reversed the downtrend and turned higher. This week's USDA report did little to change market fundamentals, but made a small increase to the carryout. Basis levels have been firming on the southern plains. Corn has traded in a trading range between $5.00 and $5.50.




Betting on higher prices in 2022 may not be enough. Even if those expectations are fulfilled, profitability may disappear in a haze of skyrocketing input costs. The traditional emphasis towards profitability has tended to focus of price, but in the new times, the input costs may overwhelm the price.


Consumers are finding wage gains are running far behind inflationary burdens on living caused by sharp increases in the cost of all goods and services. Some examples:

 1.     Rental cars up 42%

 2.     Gas up 42%

 3.     Used cars up 24%

 4.     Hotels up 18%

 5.     TVs and furniture up 12%

 6.     Food up 10%

 7.     New cars up 8%

 8.     Electricity up 5%


The profile for inflation in agriculture is worse. Nitrogen and Potassium have doubled. Phosphorus already had doubled. Gas and diesel have risen 50% and are still climbing. Natural gas has reached a 13 year high. Seed, equipment, crop applications, and repairs to equipment, are all sharp higher. This is not to mention the elephant in the room – labor that is largely unavailable, but when found, is extremely costly.


Our government officials tell us the rise in prices is temporary and Covid induced. Common sense tells us otherwise. Printing money necessarily comes with attached cost and someone at the end of the line must pay. Too many people in the work force would prefer to take government handouts than go back to work. Young people are attracted to the easy life where government guaranteed loans are forgiven and benefit packages far exceed the wages from a regular job.


Those budgeting pro-forma numbers for next year should be warned that price advances for ag products, even if achieved, may not leave a bottom-line favorable margin. The many sink holes for production costs may destroy any hope for profits. Beef producers are faced with rising cost of feed, medicine, transportation, and labor.


The high cost of food will be front and center for the Biden administration to control. Beef has been a prime target. Officials have suggested consumers cut back on beef to control climate change. The administration has promised federal assistance to start up beef plants. Targeting help for small operations might pose a vulnerability when times change and those operations find it difficult to compete.


There are policy directives that would help. The one area that would help moderate beef prices would be a change in ethanol blend rates yet the administration has failed to act. Supply chain bottlenecks could benefit from a cut back in administration benefit packages that would then send idle members of the workforce back to work driving trucks and filling other necessary jobs in the nation’s supply chains. One senses a lack of experience in matters of commerce in an administration more concerned with appearance than reality. Back home those operating in the real world will soon know that higher prices sometimes only deliver the illusion of an improved bottom line. 




Below are links to articles published in the Cattle Report pertaining to industry change. Two important changes are on the table for progress -- supply chain management and animal ID. Both applications will transform and disrupt the industry.






The Case for National ID for Cattle


Reforming the Futures Contract and Cash Trading of Cattle





Sections of the newsletter are redesigned with hyperlinks to the appropriate source pages. The hyperlinks are in light blue within the report.







Regional differences in grain and cattle basises create a difficulty in modeling a national composite for current close outs or a proforma forward look at a breakeven. Readers should consider your own area for adjustments to these models. 




The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 150 days out.  The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are par the appropriate futures contract.

750 # Feeder Steer1,163.25150.10
Cost of Gain 600 pounds620.071.03
Estimated Interest(Prime + 1%)30.05 
Current Breakeven1,813.37134.32
Current Futures1,859.63137.75
Net Profit / Loss46.263.43


The Cattle Report estimates current profit or loss on cattle placed on feed 150 days ago. This report generated from industry averages attempts to simulate a typical close out based on prevailing purchase prices for a feeder steer 150 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.

750 # Feeder Steer OKC 150 days ago1,035.00138.00
Cost of Gain 600 pounds714.221.19
Estimated Interest(Prime + 1%)24.31 
Resulting Breakeven1,773.53131.37
Current 5 Area Weighted Average Price1,671.84123.84
Net Profit / Loss-101.69-7.53



Click here to "Check out the markets "
Click Here to send your comments