Derrell S. Peel, Oklahoma State University
Cattle and beef markets started a strong run up about three years ago in late 2022. Price increases at various levels of cattle and beef markets have had differing impacts on the complex set of market levels in the industry.
Calf and Feeder Prices
Combined Oklahoma auction prices for 500-pound steers (M/L, No.1) pushed higher for the eleventh consecutive week last week, averaging $471.51/cwt, and a value of $2,358/head. The current price is up 55.4 percent year over year and up 135.6 percent since the same period in 2022. Prices for 800-pound steers (M/L, No. 1) averaged $369.71/cwt. last week, or $2,958/head, up 52.1 percent for the same week last year and up 107.4 percent since 2022.
Fed Prices
The 5-Area fed price averaged $242.90/cwt. last week, with an average weight of 1500 pounds and a value of $3.644/head. The price was up 34.1 percent year over year and up 70.0 percent for the same week in 2022.
Boxed Beef Prices
Choice boxed beef price averaged $413.60/cwt last week, up 33.1 percent from one year ago and up 59.2 percent since 2022. The monthly retail all-fresh beef price in July was $8.90/lb., up 9.2 percent year over year and up 21.3 percent since July 2022.
Margin Squeeze
The price changes reported above illustrate what happens when tight supplies drive cattle and beef markets. Higher calf prices do eventually get passed on to consumers, but only partially. All the margin levels in between also share in the margin squeeze. Since 2022, calf prices have increased by 135.6 percent; feeder cattle prices are up by 107.4 percent; fed prices have increased 70.0 percent; boxed beef prices are up 59.2 percent; and retail prices have increased by 21.3 percent. For all the margin sectors; stockers, feedlot, packers, and retailers, the cost of inputs has increased more and faster than the value of outputs.
The time dynamics between cattle and beef market sectors are complex. Not all margins adjust by the same amount and at the same time. Up to this point, packers have faced most of the losses due to lousy buy-sell margins. Feedlots have avoided much of the margin challenges thus far, largely due to the strongly up trending market combined with the time lag between placements and marketings (extended by more days on feed in most cases) and a sharp decrease in feed costs. Feedlot cost of gain is down over 28 percent since the peak in early 2023. Stocker producers are being squeezed hard from both directions as high calf prices increase stocker purchase cost and feedlots are competing more for limited feeder supplies (including lighter weight feeders) due relatively low cost of gain. Retailers have faced relatively less of the margin challenge up to this point due to strong consumer beef demand and ample beef supplies. Beef production is declining faster now, and retailers will face more challenges as beef production continues to decline in the coming months.
Margins for the various cattle and beef sectors will continue to adjust with the general squeeze expected to persist as prices continue to move higher until several months after heifer retention begins (no sign of that yet!). Cow-calf producers will continue to enjoy strong returns and the higher calf prices that encourage herd rebuilding. Those higher calf prices will continue to work their way through the industry up to consumers in a complex set of market dynamics affecting the various sectors in a variety of ways.
