It’s a good time to be in the cow/calf business, producing calves that provide the foundation for the beef chain. Cattle and beef prices are at record highs due to tight supply and strong domestic and global demand.
Average profit margins for cow/calf producers are running $480 per cow this year, said John Nalivka, owner of Sterling Marketing, a Vale, Ore., consulting firm for the red meat industry.
These are good times. Cattle and meat prices are at record highs, cattle supplies are tight and the cow herd is getting shorter all the time, said Greg Hall, a cow/calf producer out of Filer, Idaho.
All projections point to strong markets for at least two years. Heifer retention has started slowly, but it’ll be two and a half years before any effects of herd rebuilding will be seen, he said.
“But keep in mind the cost to produce beef has risen right along with” cattle prices, he said.
The price of 750-800 pound feeder steers dropped a few dollars to $214 per hundredweight last week at Oklahoma City Auction, compared with $217 a week earlier, $208 a month ago and $147 a year ago, Nalivka said.
Lighter weight steer calves at 400-450 pounds brought about $281 per hundredweight at the auction, according to USDA Market News.
Video auctions are hitting even loftier prices for light weight steer calves for fall delivery, as high as $422 per hundredweight in Superior Livestock Auction’s video auction held July 7 though 11.
Record-high prices have prompted long-time rancher Nick Purdy of Picabo, Idaho, to sell his fall calves early.
“I’ve never seen anything like it. Normally demand would go to pot and people would quit eating beef,” he said.
Nonetheless, there’s a lot of insecurity in the world, and he’s seen good markets turn around quickly. That’s why he decided to sell his calves early, he said.
The market is paying around $250 a hundredweight for 600 pound steer calves. Cost of production depends on location and what’s being fed, but profits are in the neighborhood of $500 per cow, he said.
“We’re not complaining, but it’s been a long-time in coming. For 50 years, we never made a profit,” he said.
Record feeder cattle prices are the result of tighter supplies for slaughter, sharply lower grain prices and a return to good pasture in the middle part of the country, Nalivka said.
In addition to a 2 percent decline in steer slaughter, year-over-year cow slaughter is down 13 percent and heifer slaughter is down 7 percent year to date, a strong indication of herd rebuilding, he said.
“Taking heifers out of the feeder cattle supply is a huge driver in tighter markets,” he said.
Cattle on feed in large U.S. feedlots on July 1 were down 2 percent year over year. Placements during June were down 4 percent, and marketings were up 1 percent. And it’s only going to get tighter, he said.
Nalivka is expecting the 2015 on-feed beginning inventory will be the lowest since 1996, down 2 percent year over year — following a 5 percent decline on Jan. 1, 2014.