The feeder cattle market continues to be strong as spring nears.
“There is certainly optimism in the calf and feeder cattle market,” says Andrew Griffith, Extension ag economist with the University of Tennessee. “One has to look no further than feeder cattle futures to recognize there is considerable optimism for prices to increase.
“A simple example is the difference in the March feeder cattle contract and the October feeder cattle contract, which is $20 per hundredweight. In other words, the futures market is predicting an 800 pound steer will be worth $160 more this fall than right now.”
The CME feeder cattle index value as of March 13 was $248.46, which is $20/cwt. higher than where it started the year and $33/cwt. higher than the December low, Griffith says in his weekly market outlook.
“Given the rapid ascension the past four months, it is easy to say the price could gain another $20 as the futures market is predicting over the next four to six months,” he says.
A closer look at the math helps clarify costs and prices.
“Despite the recent price action, it can be useful to evaluate how feeder cattle prices could reach such a level from a mathematical standpoint,” Griffith says.
“Assuming an 800 pound steer at $270/cwt. would result in a feedlot purchase price of $2,160 per head. One would expect the feedlot to put 600 to 650 pounds of weight on the animal prior to selling the animal to the feedlot. Thus, for simplicity, one can assume that is $600 of cost.
“The feedlot has $2,760 of cost in the purchase and feeding of the animal. If the feeder steer was purchased in October and comes off feed in April 2025, then the 1,400 pound steer would be worth $2,723 based on live cattle futures.
“This simple calculation does not account for any of the ancillary costs or potential carcass premiums, but it does demonstrate the futures market is keeping feeding margins extremely tight,” Griffith says.
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