ST. LOUIS, Mo. — Finished cattle futures settled at $169.50 last Friday, slightly lower than the record prices reached earlier in October. But ag economists say more records could be broken in future months, and those prices are providing Corn Belt cattle operations with reason – and capital – to expand.

Chris Hurt, Purdue University ag economist, said there are at least two reasons October’s price record may be broken. Lower cow numbers mean a smaller calf crop this year, resulting in fewer finished cattle in 2015 and 2016, and lower supply could pressure prices even higher.

“Second, once herd rebuilding begins, as is now evident, expansion of the beef cow herd generally continues for four to six years. This means beef supplies will be down again in 2015 and perhaps into much of 2016,” he added.

Fed cattle traded mainly around $170 for the last two weeks of October. “Fed cattle traders decided it was time to set a new record cash price,” said Andrew Griffith, University of Tennessee livestock marketing specialist. Higher fed cattle prices help offset higher prices feedlots are paying for feeder cattle.

“This means many cattle feeders have been able to maintain strong margins and even improve feeding margins in a time of record prices,” he said. The November feeder cattle contract closed at $234.15 on Friday.

Local impacts

Higher feeder cattle prices are fueling cow-calf expansion, creating more demand for pasture in some areas where pasture was converted to row crops. Some producers are creating new pasture.

“I’ve talked to a number of producers who have purchased front mount mowers for their skid steer tractors,” said Alan Adams, Illinois Beef Assoc. president, who maintains a 50-cow herd near Sandwich. “They intend on trying to improve some brush-covered areas in an attempt to get more pasture.”

Cow-calf producers are not the only segment expanding in Illinois. “Cattle feeding activity is growing in the state,” said Adams, whose family also operates a 900-head feedlot.

This year has seen an increase in cattle building permits issued in the state, he explained. Griggsville-based Longhorn Cattle Swine Confinements, a construction firm operating in Illinois, Iowa and Missouri, reports it is busy with cattle building construction, according to Adams.

The number of cattle on feed in Illinois increased 3 percent, from 160,000 to 165,000, from January 2013 to January 2014. USDA does not report monthly changes for Illinois but does for Iowa, where cattle on feed increased 2 percent this October over last year, to 560,000.

Packer and retail impacts

Higher cattle prices are helping set records at the meat counter, too. Choice cuts averaged just over $6.25 in September, with all fresh beef averaging $5.92, according to the USDA’s Agricultural Marketing Service. Consumers have shown willingness to keep paying prices driven higher by less supply.

Price relief in other key consumer goods could support that willingness to pay for future months, said Griffith. “The decline in fuel prices will free up some disposable income and some consumers will spend it at the meat counter.”

The USDA’s monthly analysis shows cattle farms captured about the same amount of the beef retail price, between 51-57 percent, from April to September. But beef packers are feeling the squeeze.

“Folks in the packing industry are not having as much fun as those in the cattle feeding business,” said Griffith. “Packer margins have moved from good to fair to poor, and now they are starting to appear dismal.”

Packers are compensating for tight supplies by demanding heavier weights. The average dressed weight for the week ending Oct. 25 was estimated at 825 pounds, 21 pounds heavier than a year ago. But heavier slaughter weights cannot compensate for the lack of available animals, according to last week’s market summary from Ron Plain and Scott Brown, University of Missouri extension.

“This week’s cattle slaughter totaled 553,000 head, down 4 percent from the week before, and 11.2 percent lower than the same week last year,” they wrote. “It was the lightest non-holiday week cattle run since early March.”

More cattle fed in Illinois, as well as in Iowa and some parts of Missouri, comes as some cattle feeding shifts north, closer to corn and distillers grains production. Cattle feeders in Texas, Oklahoma and Kansas are still recovering numbers from the effects of drought on that region’s beef herd.

It is not yet clear whether southern cattle feeders there will rebound to pre-drought levels, or if there will be a long-term shift north. Early indicators support a northern shift, especially to Nebraska, which is often grouped with Iowa in cattle feeding reports.

“Nebraska, in combination with Iowa, accounted for nearly 29 percent of the U.S. cattle on feed as of January 1, 2013, as compared with less than 26 percent a decade earlier,” stated a 2013 University of Nebraska report. Nebraska and Iowa maintained that 29 percent share in January 2014.

The number of cattle on feed also increased last year in Kansas, Minnesota and South Dakota.