CARCASS WEIGHTS ARE A DOUBLE-EDGED SWORD
By Don Close , Terrain Executive Head Emeritus
Carcass weights have become a double-edged sword for cattle feeders and a bottleneck for the industry . For the week of Sept . 21 , steer carcass weights reached a new seasonal record at 948 lbs , 30 lbs more than the same week ’ s average a year earlier . We are easily on pace to set a new record later this year . In contrast , year-to-date fed cattle slaughter is down 4 % from a year ago and cow slaughter is down 16 %. The escalation in carcass weights , however , is fully offsetting the decline in slaughter . Beef production is off by just 1 %. Packing on the Pounds A number of factors are driving the escalation in weights . First , today ’ s cattle have the genetic firepower to carry heavier weights .
Second , cattle feeders are pushing as many pounds of gain as possible in an effort to lower break-even costs . Today ’ s finished cattle were purchased as high-priced feeder cattle .
Third , cattle feeders are pushing cattle as close to the packers ’ 1,100-lb cap as possible or before too many cattle are discounted because of Yield Grades 4 and 5 . By feeding to the heavier weights , cattle feeders are attempting to push the number of carcasses into the upper twothirds of Choice and Prime to capture the most grid premiums possible .
Fourth , the swap of replacing the current cattle on feed with fresh placements is in favor of feeding the existing fat cattle additional days .
Fifth , cost of gain is currently in the range of $ 0.95 / lb to $ 1.10 / lb , and the value of gain is $ 1.80 / lb to $ 1.85 / lb . In short , cattle feeders are getting just shy of a 2:1 return on all the pounds they can pack on , and the incentives to put on additional pounds are just too great to resist even though all participants can see the damage being done to the market . From my perspective , no one can walk away from the incentives in spite of harm to the broader market . What ’ s Inflating the Cattle-on-Feed Total
The market continues to voice frustration over how the total number of cattle on feed can continue to hover at just above 100 %
of year-earlier levels amid declining cattle inventory numbers and lower available supplies of cattle outside feedyards .
While drought considerations have continued to force some cattle to the feedyard at a faster pace than was expected , the year-todate placements have not been excessive and fed cattle have been marketed at a reasonable pace . It is the additional days on feed that has inflated the cattle-on-feed number . The additional days are not creating more cattle , but they are creating additional tonnage of beef . And that has been a challenge for keeping wholesale beef channels cleared .
As cattle outside feedyards continue to contract , the reduced placement rates will eventually pull cattle-on-feed totals below yearago levels . Market Outlook
We at Terrain continue to have a solid price outlook for fed cattle and the market as a whole . Seasonally , beef demand is expected to improve as the weather cools and ribs and tenders gain strength as end users in the retail , hotel , restaurant and institution spaces start building inventory in preparation for the upcoming holiday season .
The other huge price-supportive influence on the market is that heifer retention for herd rebuilding still lies ahead . When heifers as a percentage of cattle on feed falls from the current 40 % level to something below 36 %, the cattle-on-feed number will decline . It may be at that point — perhaps in 2026 — when feeders can ’ t pack on enough additional pounds to make up for the lower head count . Packers will be looking to fill shackle space and use prices to push for more lighter cattle , and average carcass weights may finally decline to a more historical norm . Of course , lighter , fewer cattle would further tighten fed beef supply and likely push wholesale beef prices higher .
Terrain is a team of economists who provide expert analysis to the customers of American AgCredit , Farm Credit Services of America and Frontier Farm Credit . Learn more at Terrainag . com .
14 NATIONAL CATTLEMEN www . NCBA . org