Cattle supplies remain squeaky-tight and will continue that way.
September feedlot placements showed a larger-than-normal seasonal uptick from August. On-feed placements showed the first year-on-year rise since February. Still, September's 2.007 million placements were 314,000 below the 2008-12 average for September.
Despite higher placements, the Oct. 1 feedlot inventory was down 1.5% from a year earlier. It was still 6.3% smaller than the 2009-2013 average. October marked the fifth time in the last five years that cattle on feed were the lowest for that calendar month.
Steve Meyer of Paragon Economics in Adel, Iowa, says marketing patterns could create some price pressure on fed cattle in late winter and early spring.
"Lighter early summer 2014 placement weights and heavier weights of August and September will likely cause a bunching effect of fed cattle in late winter and early spring, narrowing the spread between April and June live cattle futures," Meyer explains. "Supplies will certainly not be burdensome during that period, but may be larger relative to autumn's light levels."
USDA budget sequestration canceled the 2013 mid-year cattle inventory survey. Lack of those numbers makes pace of beef cow herd expansion more of a guessing game.
However, October's Cattle on Feed Report provides a clue. Heifers and heifer calves in commercial feed yards on Oct. 1 totaled 3.55 million head, down 3% from Oct. 1, 2013. Total cattle on feed were down 1%. Relatively fewer heifers entering feedlots suggests more heifers are staying on ranches and farms to expand beef breeding herds as one would expect given recent cow-calf profits.
Beef prices should hold
USDA projects the 2015 annual average five-area direct choice steer price will fall in the $149 to $162 range, compared with about $153 this year and $126 in 2013 and $123 in 2012.
Oklahoma City feeder cattle are projected to average $215 to $228, up from this year's average of just over $200 and well above 2013's $147 and 2012's $146.
By comparison, next year's annual average Iowa-southern-Minnesota barrows and gilts are projected to average in the $63 to $68 range. That's down from this year's annual average near $77.50.
Next year's 12-city broiler price is projected to average $1 to $1.08 a pound, up from this year's roughly $1.05.
Pork is getting cheaper. The price spread between beef and chicken will widen. Hopefully, U.S. economic growth will maintain consumers' appetites for beef.
Still, beef increasingly looks like premium-priced product. Analysts will continue to fret over whether consumers will look elsewhere for better meat protein value. Pork and broiler producers and promoters will certainly be working to lure customers away from beef.
On breaking even
An acquaintance asked a feedlot operator if he was buying feeder cattle. "No," he replied. "Despite much lower corn prices, feeder cattle have gotten so pricy that the best I could do is break even."
Here's the punch line. Despite the fact that cattle feeders hate to see empty pens, the not-so-aggressive feeder cattle buyer added, "I can break even doing nothing."
That exchange reminds me of another acquaintance, who, when asked in a previous high-risk time if he had any surefire ways for someone to double their money.
"Yes," he replied, "Fold it over and put it back in your pocket."