The live cattle market’s performance this year on both sides of the border has been remarkable in many respects. Who would have imagined that U.S. packers would pay $170 per cwt for cattle. After all, half that was a pretty good price not that long ago.
That price is likely to be the top for the year, although the snowstorms hitting the northern states as I write this in November might give prices another upward push. U.S. live cattle are on target to average about $155 per cwt this year, a full 23 per cent higher than the 2013 average of $125.89.
U.S. cattle feeders thus continue to enjoy one of their best periods of positive margins for many years though this might be coming to an end because of the record high prices they keep paying for feeder cattle. Those prices are one reason why exports of Canadian feeder cattle this year have been well ahead of last year (up 45 per cent at the end of October).
Cattle feeders have also fattened their margins by feeding cattle to record heavy end points. Steer and heifer carcasses seasonally peak in the fall, so that’s when they set new records in 2007, 2008 and 2009. But it took until 2012 to eclipse those records. Weights from the start of this year tracked closely with 2013 weights. But they began to diverge in August by moving higher each week compared to a year earlier. Steers thus established a new record high the first week of September while heifers did the same the last week of the month. Steers after that made four more new highs and heifers made three more.
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The week ended October 25 saw steer carcasses break the 900-pound level for the first time (902 pounds was the average) while heifer carcasses averaged 826 pounds. That’s what a steer carcass weighed only seven or eight years ago. Barring a weather setback, carcass weights might continue to set new records in December.
Steer carcass weights look set to average 870 pounds this year, up one per cent on last year, because of the surge that began in September. Steer weights in the past five years have increased 4.8 per cent on a monthly basis from May to October. This year they increased 6.1 per cent. From a historical perspective, weight increases over 50 years will have added 223 pounds or one-third to the average steer carcass.
Several factors explain the surge. Cattle are being fed longer than ever before because replacement costs are so high. At the same time, corn prices have declined and it is still economical for cattle feeders to add weight. In turn, packers are not discounting carcasses because they need every animal they can get their hands on. Only a decade ago, a carcass weighing 900 pounds or more was heavily discounted. Now that’s the average steer carcass, meaning some are over 1,000 pounds.
At some point, cattle feeders will need to evaluate feeding efficiency against further weight gains. If efficiency suffers, then cost of gains will increase. But the weight gains this fall showed how much feeding cattle has advanced in mixing high-energy rations and other inputs to maximize cattle growth.
One side-effect of feeding cattle even longer is that cattle continue to grade a high percentage of USDA Prime and Choice. The Prime category set new weekly records twice in October, with the last week seeing 5.02 per cent of all cattle grade Prime. The Choice grade set a new record of 67.96 per cent in mid-January and has remained above 63 per cent ever since. U.S. beef production might be down but the quality remains high.