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Economic Conditions: Beef Feedlot and Cow-Calf

This is the third in a series of blog posts about the economic conditions of various commodities for the quarter ended June 30.

Cattle feeders experienced strong profits in the second quarter due to very strong prices and reduced feed costs.  Fed cattle prices averaged $150 per cwt. during the second quarter of 2014, a continued surge in prices that began during the fourth quarter of 2013. This compares to average fed prices one year ago of $127 per cwt. Feeding margins also improved, as feed costs continued to decline in the second quarter in response to the excellent crop progress reports.  Higher than anticipated domestic demand in the face of record beef prices at the meat case as well as robust exports also helped prices set record levels at quarter-end, typically a time of a seasonal summer low. Exports through May 2014 are 8 percent ahead of last year.

The impact of elevated cow slaughter in recent years due to drought conditions has limited supplies of both fed cattle and placements. Additionally, there is an uptick in heifer retention, indicating a cycle of herd rebuilding that has further decreased feedlot supply. Fed slaughter through the second quarter lags year-ago numbers by approximately 5 percent, leading to a similar 5.2 percent reduction in overall beef production. Cow and bull slaughter was down 11.5 percent year over year.

Cow-calf operations also remained very profitable due to record calf and yearling prices.  Feeder cattle prices rose as limited supplies from herd rebuilding, along with decreased feed costs, were supportive.  Prices for 550 pound steer calves averaged about $251 per cwt. compared with $161 per cwt. in the second quarter of 2013, while 750 pound yearling steers averaged $207 per cwt. compared with $144 per cwt. a year earlier.

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