Rising input costs erode both producer, packer margins

Jeff Swenson

Prepared and written by Jeff Swenson, DATCP Livestock and Meat Specialist. The Market Update draws information from several sources, including trade publications, radio broadcasts, agricultural news services, individuals involved in the industry as well as USDA NASS and AMS reports.

Jeff Swenson

Fed cattle are trading in a wide price range as cattle likely to grade Choice and Prime are harder to find and are demanding higher prices.

Many analysts were calling for a steady market with last week’s higher prices. Cattle traders relying on negotiated trade started the week seeking higher bids, which pushed the bulk of sales to the end of the week. A cold front expected move into the Plains will impact feedlot gains in those states.

Higher cattle prices haven’t meant black ink for cattle feeders as rising input costs have eroded margins. Packer margins have narrowed as well. The Choice beef cutout value gained $2.75 last week, finishing Friday at $263.75. The estimated harvest of 667,000 was 1,000 head less than the previous week and 15,000 head more than the same week last year.

Beef exports in September dropped below 300 million pounds for the first time since February. Currency values in some key markets relative to the U.S. dollar are being cited as a reason for the decrease.  September beef export value equated to $418.67 per head, down 6 percent from a year ago, but the January-September average was still up 20 percent to $465.48. Exports accounted for 14 percent of total September beef production.

Hog harvest lagging

Hog harvest is still running nearly 3 percent behind 2021 year-to-date. Coupled with the lighter live weights seen recently, overall pork production is trailing last year by 2.4 percent.

Packers are still motivated to move hogs through the pipeline.  Last week’s harvest estimate of 2.577 million hogs was 20,000 more than the previous week, although 35,000 less than the same week last year. The pork carcass cutout value finished last week $2.10 lower at $96.72. Lower belly prices were the main drag on carcass values, while hams continue to show strength.

Pork exports in September were higher than last year for the second consecutive month. Exports for the month were 222,202 metric tons, up 1 percent from a year ago. Export value increased 9 percent to $664.8 million – the highest since June 2021. September pork export value equated to $62.37 per head, up 10 percent from a year ago.

Exports accounted for 27.3 percent of total September pork production, up from 26.9 percent a year ago. Mexico continues to be an important pork customer. There are concerns that the value of the dollar will give the key markets of South Korea and Japan less buying power.

Lamb cutout price continues to fall

The lamb cutout price was lower again last week, finishing Friday with a price of $546.25, $2.04 lower than the previous Friday. The USDA called the cash fed lamb market steady to $15.00/cwt higher. Live weights are now averaging two pounds lighter than a year ago. The weekly harvest estimate was 34,000 head, 2,000 higher than a year ago, while 4,000 head below the same week last year.

September exports of U.S. lamb muscle cuts were 269 metric tons up 175 percent from last year. Export value totaled $1.31 million, up 67 percent. Through September, lamb muscle cut exports increased 76 percent to 1,676 metric tons valued at $9.9 million.

State livestock market roundup

Price ranges widened as competition for high-grading cattle increased. High-yielding, high-grading cattle brought $125.00 to $150.00/cwt. Groups of high Choice and Prime lots selling from $151.00 to $161.00/cwt. Choice Holstein steers were mostly steady, bringing $107.00 to $134.00/cwt with high grading Holstein steers bringing $135.00 to $138.00/cwt with a few above.  Silage fed, under finished or heavy dairy breed steers brought $75.00 to $107.00/cwt. Dairy x Beef steers were bringing $105.00 to $147.00/cwt.

Cows were lower. A bulk of the cows brought $48.00 to $72.00/cwt with some selling into the low 80’s. Doubtful health and thin cows were bringing $48.00/cwt and down. Dairy breed bull calves were steady, bringing $50.00 to $135.00/cwt with heavier, well cared for calves up to $180.00/cwt. 

Beef and Beef Cross calves were mostly steady, selling to $335.00/cwt. Market lambs brought $95.00 to $110.00/cwt with some reports of tops to $150.00/cwt with some light market lambs selling higher.