Compared to levels back in October 2016, cattle prices climbed to very high levels during the first five months of this year, but have recently dropped significantly, especially for fed animals. Over the last month, fed steer prices have declined by $17.50 per cwt. Futures market prices have been volatile. With that said, here we will take a brief look at the spread or price difference between fed steers and 700-to 800-pound steers in the Southern Plains. What this weekly price relationship suggests is that premiums for feeder steers relative to a fed animal have returned to normal.
For the week ending June 17th, the premium for a 700-to 800-pound steer above the negotiated slaughter steer price for that same week was $28.72 per cwt. or 24%. That premium has been increasing seasonally, which is normal into the early summer months. The premium is slightly above a year ago ($27.34 per cwt. or 23%), likely reflecting lower cost of gain in feedlots (e.g. corn prices are down some year-over-year). Looking back to 2014 and 2015 that premium has dramatically declined. In 2014 the premium for the comparable week was $55.09 per cwt. (37%) and then surged in 2015 to $82.42 or 55%. Those premiums in 2014 and 2015 were not sustainable. Last year and 2017’s have been rather normal.