Weekly USDA feeder cattle prices for TX and OK were used to calculate projected breakevens on cattle bought last week, week ending March 4, 2011. Breakevens were calculated for each weight group within sex (steer and heifer). Ration price, $/ton dmb, was estimated at $320. Other variables including interest, yardage and % feed financed were estimated to be 6%, $0.05/d and 100%; respectively. As it is known that actual input estimates will vary greatly by region and by yard within region, our goal was to illustrate pricing differentials between weight classes and sexes of cattle.
Feeder cattle movement for the week ending March 4, 2011 was variable by region and weight class. High corn and ration prices are forcing cattle feeders to be extremely selective in their purchases, where some are beginning to pass on most purchases as the replacement and production costs have moved projected breakevens beyond their realistic goals. Going forward, unless the fat board posts a substantial rally and the corn market shows sustained weakness, the feeder market may set itself up for a contra-seasonal break because of a supply build up as feedyards make the decision to sit idle and not replace the cattle being sold as fats today.
Below is an analysis of heifer value relative to steers. The question addressed: Is the cash discount applied to heifer feeder cattle to wide or narrow? As can be seen, with performance accounted for, the discount applied to heifers is often larger than what should be applied in the cash market.