Limited Supplies Send Feeder Cattle Prices Sharply Higher

If you were able to watch any of Northern Livestock Video Auction's Summertime Classic sale last week, you saw just how strong the feeder cattle market traded. Last week's strong feeder cattle market wasn't fanned higher by strong buyer demand as the fat cattle market waited to trade until late in the week, and both the live cattle and feeder cattle contracts struggled in the first half of last week's market.

With corn prices still dancing around $5.50 per bushel, and interest rates still on the rise, many wonder how the feeder cattle market has the strength and support it currently does.

There are a few supportive factors helping keep the feeder cattle complex strong. But, more than anything, the lack of supply in this year's marketplace amid tremendous beef demand has taken the market by storm. With high feeder cattle prices inching up to $2,200 per head on yearlings, it takes a bold buyer, who's willing to take a risk in the market, to buy feeders at that price. But throughout last week's market, we saw it again and again.

It wasn't just Northern Livestock Video Auction that posted great sales last week. The CME Feeder Cattle Index (representing feeder cattle sales across the nation) rallied to $242.29 last week. The last time the index was that high was in early December 2014.

With the U.S. beef cowherd being the smallest it's been in the last 52 years, feedlots knew procuring feeder cattle this fall was going to be challenging, as the market doesn't have near the supply buyers are used to, and buying them at an affordable price point was going to be even more difficult, as everyone wants to be involved in the cattle market when prices are hot. Even with the challenges of high feed prices, increasing interest rates and questionable breakeven projections, feeder cattle prices have only grown stronger due to the industry's limited supply.

ShayLe Stewart can be reached at [email protected]