The largest price advances in 2010’s fourth quarter was for lightweight calves under 500 pounds, which gained 10.00 to 15.00 during the month of December and set new record-highs in many major marketing areas of the United States. Before last month, $2 per pound of beef was a price tag reserved for processed and wrapped product at the butcher’s meat counter. But, mid-December saw several live calf markets reach $200/cwt on individual pee-wee steers or bulls weighing under 300 pounds. More impressively, a ring-full of reputation ranch steers weighing 340 pounds reached that magic level in southwest Kansas. Calf buyers collectively think that stocker calves will be even harder to buy as we approach spring, so they are willing to take a tender $700 investment into the brunt of winter with little available forage. Southern Plains dryland winter-wheat pastures are nearly barren from the lack of moisture and grazing of any kind is hard to find, even in the Southeast where early cold snaps have been more brittle than normal.

Heavier calves (over 500 pounds) and yearlings also sold higher during the last month of 2010, although not nearly as sharply as the lighter-weights. Feedlot and pre-condition lot replacements traded $3 to $5 per cwt higher through December, despite stubbornly high grain and feed prices that refuse to weaken with cash corn now $5.50 $6.00 per pushel in the central portions of the country. The majority of cattle feeders are now fully dependent on some type of by-product feed source as cost-of-gains are increasingly computed from distiller’s feeds rather than a high concentration of whole grains. Most cattle feeders are no longer so hesitant in using substitute protein sources, even late in their feeding program.  Nutritionists have found recipes for supplements that can be added with little or no loss of performance.  Ethanol plant residues have also seen sharp price increases (some wet products have doubled in price in recent months) but rations with a high percentage of by-products are still much cheaper than the traditional corn diet.

Fed cattle sales improved to as much as $104 live-basis in the weeks leading up to 2011, but boxed beef values struggled in the weeks leading up to Christmas which pressured fat cattle late in the month.  Beef wholesalers have trouble maintaining movement when choice boxes move past $160. Perhaps this is the level at which steakhouse menus have to be reprinted and beef can no longer keep its market share. The beef industry does not want its products to get so expensive that consumers change their eating habits as economies are still struggling. But, tight inventories of cattle are passing along unseen price levels and until the lines of production start to get backed-up at some point, cattle and beef will remain in a sellers’ market.

Corbitt Wall is officer-in-charge and the Missouri federal-state supervisor at the USDA-Missouri Livestock and Grain Market News Service.