Feeder Cattle Adjust to Limited Fed Cattle Opportunities and Higher Feeding Costs

May 14, 2021

By Stephen R. Koontz

Futures price for most the live cattle and feeder cattle contract have shown substantial weakness through much of April 2021. Optimism from late in the winter and early in the spring is being replaced by realism that it is going to take another 2-3 months to work through the large front-loaded fed animal inventories, that fed animal slaughter is at capacity, and that costs of gain are now substantially higher than the past several years. Futures prices now reflect more the conditions that the underlaying cash market has been showing since the beginning of the year. The cash market has been much less optimistic than the futures market – although the futures have changed over the prior month.

Fed cattle slaughter has been persistently high for much of the year and Saturday slaughter has been routinely over 60 thousand head. Combined fed steer and heifer slaughter has been just short of 525 thousand head per week. And it is likely that this is a reasonable maximum that the packing industry can process. Packer margins are strong but there is little incentive to pay more for fed cattle when plants are operating six days per week. There is little to no possibility to process more cattle regardless of the incentive to do so. There are a lot of historical relationships that are irrelevant when the packing industry is essentially at capacity. Market-ready inventories need to be reduced. This appears to be happening in that the last Cattle on Feed report communicated drops in both cattle on feed over 120 and 150 days. But supplies will likely be abundant into late summer.

The other market event complicating feeder cattle and calf market outlook is the substantial rally in feed prices. The corn futures market increased $2 per bushel between August of last year and mid-January. The July contract held steady at about $5.25 until the Prospective Planting report surprises. Since the end of March, the contract has increased an additional $1.50. This market is clearly rationing old crop among users of corn. The formula cost of gain for cattle this summer is well above $1 per pound. The feeding margin between OCT live, JUL corn, and MAY feeders is breakeven – the details depending on the basis. If live cattle have little upside and the corn market continues to ration old crop, then it is feeder cattle that have to adjust. While margin calls are uncomfortable, forward pricing in a rallying spring feeder cattle market again proves to be a smart perspective.

Source : osu.edu

Video: What Does 20 MILLION Hogs a Year Look Like?

?? The Multi-Plant System Processing 20 Million Hogs Annually in the Midwest JBS USA operates multiple large-scale pork processing facilities across the Midwest, including major plants in Iowa, Minnesota, and Indiana. Combined, these facilities have the capacity to process approximately 20 million hogs annually.

Each plant operates high-speed automated slaughter systems capable of processing up to 20,000 head per day, followed by fabrication lines that break carcasses into primals, sub-primals, and case-ready retail products.

Hog procurement is coordinated through electronic marketing platforms that connect regional contract finishing operations and independent producers to plant demand schedules. This digital procurement system allows for steady supply flow and scheduling efficiency across multiple facilities.

Processing plants incorporate comprehensive food safety systems, including pathogen intervention technologies, rapid chilling processes, and integrated cold-chain management. USDA inspection is embedded throughout the harvest and fabrication stages to ensure regulatory compliance and product integrity. Finished pork products — from bulk primals to retail-ready packaged cuts — are distributed through coordinated logistics networks serving domestic and export markets.