Feeder cattle prices remain strong in spite of negative feeding margins for cattle marketed over the past 90 days. Even though feed costs are relatively low with the outlook against large feed grain supplies not expected to change that scenario into 2019, negative margins would typically pressure feeder cattle prices.
Not so this year. However, the fed cattle outlook into next year remains positive and above break-even prices. At the same time, I get the impression the available feeder cattle supply outside feedlots is smaller than USDA implies, particularly with placement activity over the past 120 days. Those two factors together would definitely lend support to the feeder cattle market.
Again, while one can be optimistic, attention to break-even prices is critical.
Hedging opportunities for cattle marketed into the beginning of next year are becoming more attractive and you won’t want to overlook those opportunities going forward.
At the same time, even before the cattle go into the feedlot, sharpen your pencil when considering retained ownership with high feeder cattle prices. If feeder cattle prices (750 lb. to 800 lb.) remain in the low-to-mid $1.50 range, the expected breakeven to finish those cattle will range from $1.15 to $1.20—no hedges on those cattle if they finish before the end of the year and the better plan might be to take that $1,200 per head to the bank. Also, branded program cattle can offer premiums that shouldn’t be overlooked as an option.