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Cattle Numbers Continue to Be Tight; Calf Prices Hold Strong

09:29AM Aug 26, 2014
BT Brangus Bull Calf Florida 2

Cattle numbers continue to be tight, especially for feeders. In USDA’s latest Cattle On Feed report, inventory numbers, placements and marketings all decreased July.

Compared to last year, United States cattle on feed in feedlots of 1,000 head or more totaled 9.8 Million head. That’s down 2 percent compared to last year. Placements dipped 7 percent. Marketings of fed cattle dropped 9 percent.

If you look at this report and break it down by weights, placements were down across the board except in one category. That’s calves weighing less than 600 pounds. That’s good news if you’re in the business or raising and selling the next generation of fats.

Even as the 2014 spring calf crop floods fall markets, calf prices are holding strong. With inventories down, the number of producers available for stockers and feed yards remain scarce.

"If you figure the gross margin of the value of gain from buying these light weight calves and putting anywhere from 200 to 400 pounds on them, the value of gain is pretty good right now. It’s well over $1 to $1.30 in some cases. The interesting fact is feed lot cost of gain is coming down and normally those two things are pretty closely related and they get back in inventory fasts. Right now, the stocker value gain is holding considerably stronger," said Oklahoma State Livestock Marketing Specialist, Derrell Peel.

As the 2014 grain crops finish strong, feed yards costs are likely to keep falling. That combined with a better forage situation in many states may make it tough to find cheap calves in the coming months.

"It looks to me like the normal seasonal pressure we might see on calves and stocker cattle this fall really won’t happen. We’ve got potential for decent stocker demand from a forage standpoint to buy those calves. Cattle numbers are extremely tight. This year’s calf-crop was a little smaller. We won’t see a big run. We are going to have strong demand. Even feedlot demand for these lighter weight animals may increase a little but as well get into the cheaper feed costs. I’m not looking for any decreases this fall or even seasonally. In fact, they could go up. That’s a little hard to say with record-prices but I think it’s possible," said Peel.

Peel says this scenario isn’t likely to change quickly. He foresees tight supplies and strong calf prices for at least the next couple of years.

Much of the down turn in feedlot inventory numbers is regional. Cattle on feed in Nebraska actually went up in this report. Drought stress in California had the biggest drop.