What Are Feeder Cattle?

Feeder cattle, in some countries or regions called store cattle, are young cattle mature enough either to undergo backgrounding or to be fattened in preparation for slaughter. They may be steers (castrated males) or heifers (females who have not dropped a calf). The term often implicitly reflects an intent to sell to other owners for fattening (finishing). Backgrounding occurs at backgrounding operations, and fattening occurs at a feedlot.[1] Feeder calves are less than 1 year old; feeder yearlings are between 1 and 2 years old. Both types are often produced in a cow-calf operation. After attaining a desirable weight, feeder cattle become finished cattle that are sold to a packer (finished cattle are also called fattened cattle, fat cattle, fed cattle, or, when contrasted with carcasses, live cattle). Packers slaughter the cattle and sell the meat in carcass boxed form.[2]

The United States grades feeder cattle that have not reached an age of 36 months on three factors: frame size, thickness, and thriftiness. Thickness evaluates feeder cattle‘ muscle development in relation to skeletal size.

Price to pay for feeder steers in order to receive average returns for labor, overhead and profit with assumed prices for fat cattle and feed, with typical feeding programs; U.S. Department of AgricultureHealth status, and visual indicators of health, can give feeder cattle premiums or discounts when sold in auctions. Feeder cattle with other obvious physical indicators that would imply sickness are heavily discounted. Discounts on sick feeder cattle compensate for their increased risk of death, and lower performance in weight gain even if they recover.

These programs may include weaning 21 to 45 days before sale, vaccinating for respiratory and digestive diseases, de-horning, castrating, implanting growth implants, treating for external and internal parasites, and starting to switch the feeder cattle to grain-based feed. The Index inputs are seven-day feeder cattle auction, direct trade, video sale, and Internet sale transaction prices for qualified steers publicly reported from the following twelve feeder cattle producing states: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas and Wyoming. Additionally, qualifying steers must not exhibit predominantly dairy, exotic, or Brahman breed characteristics, and must not have an origin outside of the US.

The CME Feeder Cattle Index is calculated using prices reported by USDA’s Agricultural Marketing Service (AMS). Its weighting in S&P GSCI give feeder cattle futures prices non-trivial influence on returns on a wide range of investment funds and portfolios . These commodities share many fundamental demand and supply risks, such long feeding periods, weather, feed prices, and consumer sentiment, which makes grouping them together useful for commercial discussions about both the commodities and their futures contracts.

Depending on the operation, producers purchase corn , soybean meal , and other commodities as feed. ^ Comerford, John W.; Kime, Lynn F.; Harper, Jayson K. “Feeding Beef Cattle” . (1985), “The Economic Roles and Implications of Trade in Livestock Futures” (PDF) , in Peck, Anne E.

What is the difference between live cattle and feeder cattle?

Feeder cattle are weaned calves just sent to the feedlots (about 6-10 months old), and live cattle are cattle which have attained a desirable weight (1150-1375 pounds for heifers, and 1200-1500 pounds for steers), to be sold to a packer. … “Live” in marketing refers to selling cattle by weight, not carcass quality.

Why are feeder cattle more expensive than live cattle?

Feeder cattle typically need to gain more than 500 pounds before they reach slaughter weights, so corn prices have a big impact on feeder cattle prices. Live cattle, on the other hand, are ‘finished’ products that are ready for sale to slaughterhouses.

What weight are feeder cattle?

Feeder cattle are weaned calves that have been raised to be 600-800 lbs. Once a calf reaches a minimum weight, it is sent to a feedlot with the goal of putting on weight aggressively.

What are feeder cattle selling for?

Feeder Cattle is expected to trade at 161.83 USd/Lbs by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 171.03 in 12 months time.

In this guide to understanding feeder cattle as a commodity, well explain why its valuable, what its used for, how its produced, and what drives its price. We also list the countries that produce the most feeder cattle and discuss what experts say about its price.

Cattle are a valuable commodity across industries like agriculture, clothing, sporting goods, and even musical instruments. Ultimately, when they reach a weight of about 1,200 to 1,400 pounds, feeder cattle are slaughtered to produce beef.

Worldwide consumption of beef approaches around 60 million metric tons annually. The economic impact of the meat and poultry industry in the United States alone is over $1 trillion. Beef production creates millions of jobs including suppliers, distributors, and retailers.

Feeder cattle are a vital part of the global ecosystem of beef production and an important commodity in world markets. Successful production relies on proper animal husbandry techniques as well as good economic decision-making. Ranchers begin the process by breeding cows (females) with bulls (males) either naturally or with artificial insemination (A.I. )

Ranchers traditionally breed cattle in the summer to produce calves in the spring. Ranchers must allocate a set amount of acres of pasture or grazing land for each cow and its calf offspring. In the United States the top cattle producing nation in the world the stocking rate can be as low as five acres per cow-calf pair in high precipitation regions of the East to 150 acres in dry, arid regions of the West and Southwest.

Each year ranchers typically cull about 15 to 25% of the cows in their herd and send them to slaughter. Failure to reproduce Advanced age Bad teeth Drought conditions High feed costs. Once the calves are born, a certain number of females are held back to replace the cows that are culled .

First six months : Calves remain with the cow and receive their initial nutrition from nursing. Over time, ranchers supplement this nutrition with grass feeding and eventually with grain. Stocker operations : Calves get fed on summer grass, winter wheat or some other roughage until they reach the weight of 600 to 800 pounds, which is when they become feeder cattle.

Cows (females that have given birth) and bulls (sexually intact males) generally are kept for production and not placed in feedlots. The rationale is that as the cost of producing the finished animal declines, buyers are willing to pay more for the intermediate product. Severe drought conditions or excessive cold spells can diminish grain supply and send prices higher.

Beef is a discretionary item and generally more costly than other animal and vegetable food sources. China, Canada, and Mexico account for the three largest destination countries for US agricultural exports. Beef competes with other animal products such as chicken, pork , lamb and fish.

Many factors can impact which of these products consumers choose, but cost often plays the biggest role . As the cost of beef rises, consumers may substitute other animal proteins in their diets. Many of the added input costs of beef production land use, water , and nitrogen fertilizer, just to name a few are very sensitive to energy prices.

One analyst cites the abundant supply of three sources of meat poultry, pork, and beef as reasons to sour on the market: The last time the U.S. calf crop was this large was back in 2007 when it reached 36.8 million head. We havent seen a sharp increase in the cow slaughter so the U.S. cattle herd continues to expand at a rapid pace.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Large Frame (L). Feeder cattle which possess typical minimum qualifications for this grade are thrifty, have large frames, and are tall and long bodied for their age. Steers and heifers would not be expected to produce U.S. Choice carcasses (about 0.50 inch fat at twelfth rib) until their live weights exceed 1250 pounds and 1150 pounds, respectively.

Feeder cattle which possess minimum qualifications for this grade are thrifty and thin through the forequarter and the middle part of the rounds.

Feeder calf grades are national standards that offer more consistent communication between the producer and other segments of the beef industry, such as stocker operations and feedlots. The terminology of the feeder cattle market can be vague and challenging to understand for both the novice and experienced cattlemen. The grading system is often not explained or conveyed clearly. Beef producers may be skeptical as to why their cattle or individual calves have sold for less money than others. Being informed on feeder cattle grading standards will help the beef cattle producer understand more about feeder calf pricing. Many variables equate to calf value. The U.S. Department of Agriculture Feeder Calf Grading standards can apply to cattle under 36 months of age.

Conversely, if the animal must be fed to a weight endpoint outside of industry acceptability to achieve ideal carcass merit, potential buyers will also discriminate. Examples of unthrifty cattle are those with double muscling, severe emaciation, or a leg injury that would prevent proper weight gain.

Largerframed cattle generally have a higher rate of gain, require more time on feed to reach the same finish or fatness, and will attain a heavier slaughter weight. The 0.5-inch target is used in the USDA standards as a reasonable live animal predictor of a calfs ability to grade low choice or higher. However, genetic selection for marbling in purebred herds has made this more achievable and has improved the industrys percentage of cattle grading low choice or better.

Small-framed cattle will generally receive much lower prices throughout the beef chain and produce poorer yielding carcasses with more trimmable fat. An MS 1 feeder calf with excessive flesh will appear to have a less rounded shape due to the fat deposits that develop in the upper hip and lower quarter. Table 4 shows the price differences reported by a USDA Market News summary of five weekly auction sales across Georgia during September 2016.

Feeder cattle

Feedlots producing live cattle for slaughter will typically purchase 500-850 pound feeder cattle calves and feed to grow the animals into 850-1400 pound cattle.Cattle producers and backgrounding operations balance feeder cattle prices, weights, time taken to fatten, death rates, and other feeder cattle factors against feed prices, live cattle prices, and other operating factors to profit from their operations.

United States feeder cattle grades[edit]

The United States grades feeder cattle that have not reached an age of 36 months on three factors: frame size, thickness, and thriftiness.The above three factors and their segmented categories combine to form individual grades. For examples, for thrifty cattle, the frame and thickness factors combine to form 12 different grades of thrifty cattle: No. 1; Large Frame, No.2; Large Frame, No. 3; Large Frame, No. 4; Medium Frame, No. 1; Medium Frame, No. 2; Medium Frame, No. 3; Medium Frame, No. 4; Small Frame, No. 1; Small Frame, No. 2; Small Frame, No. 3; and finally Small Frame, No. 4.

Cash market factors[edit]

Health status, and visual indicators of health, can give feeder cattle premiums or discounts when sold in auctions. Feeder cattle with dead hair and mud are often sold at a discount, and those that are classified as “stale” are sold at a discount. Feeder cattle with other obvious physical indicators that would imply sickness are heavily discounted. The primary sickness encountered in feeder cattle is respiratory sickness. Discounts on sick feeder cattle compensate for their increased risk of death, and lower performance in weight gain even if they recover. Cattle that looked visually “thin” or “fleshy” are generally given discounts or premiums distinct from sickness discounts, as these visual traits do not necessarily indicate sickness and could be advantageous in particular feeding scenarios.Lot size, or the number of feeder cattle for sale in a group, in relation to transportation available, weight, and sale location impact feeder cattle prices heavily. Price per weight increase with lot size and reach a maximum when lot sizes approaches truck-load sizes. As lot sizes exceed truck-load sizes, prices level off and eventually decrease. This represents fewer buyers and available transportation for larger lots of feeder cattle.

Futures market trading[edit]

Feeder cattle Futures contracts, traded on the Chicago Mercantile Exchange (CME), can be used to hedge and to speculate on the price of feeder cattle. Cattle producers can hedge future buying and selling prices for feeder cattle through trading feeder cattle futures, and such trading is a common part of a producer’s risk management program.The contracts are for 50,000 pounds of feeder cattle, and call for cash settlement based on the CME Feeder Cattle Index.

Related derivatives[edit]

Feeder cattle futures contracts are cash settled based on the CME Feeder Cattle Index. The Index inputs are seven-day feeder cattle auction, direct trade, video sale, and Internet sale transaction prices for qualified steers publicly reported from the following twelve feeder cattle producing states: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas and Wyoming. Qualified steers must be between 700 and 899 pounds, and be in either the Medium and Large Frame #1 or Medium and Large Frame #1-2 feeder cattle grades. Additionally, qualifying steers must not exhibit predominantly dairy, exotic, or Brahman breed characteristics, and must not have an origin outside of the US.The CME Feeder Cattle Index is calculated using prices reported by USDA’s Agricultural Marketing Service (AMS). AMS reports number of cattle sold, average price of sale, and average weight of cattle sold for daily feeder cattle transactions for every US state in 50 pound segments for each grade segment. For example, separate average prices and average weight data are reported for the Medium and Large Frame #1 700-749 pound category, and for the Medium and Large Frame #1 750-799 pound category. The CME Feeder Cattle has eight qualifying reporting segment derived from its qualifying weight and grade standards: Medium & Large #1 steers weighting 700-749 pounds, Medium & Large #1 steers weighting 750-799 pounds, Medium & Large #1 steers weighting 800-849 pounds, Medium & Large #1 steers weighting 849-899 pounds, Medium & Large #1-#2 steers weighting 700-749 pounds, Medium & Large #1-#2 steers weighting 750-799 pounds, Medium & Large #1-#2 steers weighting 800-849 pounds, and Medium & Large #1-#2 steers weighting 849-899 pounds.The CME Feeder Cattle Index is calculated through the following steps:Qualifying Cattle sold with certain minor notes are also included in the CME Feeder Cattle Index.

Gross Margin Financial Instruments[edit]

Cattle producers purchase feeder cattle to feed into live cattle or fed cattle for sale to slaughterhouses. Depending on the operation, producers purchase corn, soybean meal, and other commodities as feed. The difference between the selling price for live cattle and the costs of purchasing feeder cattle and feed (usually assumed to be corn, regardless of actual mix of feed used) is referred to asIn addition to exchange-traded products, cattle producers can purchase livestock gross margin insurance policy contracts (LGM-Cattle) sponsored by the USDA Risk Management Agency from authorized crop insurance agents. These insurance policy contracts are bundles of exchange-traded options on futures contracts, and prices for these policy contracts refer to exchange-traded futures prices.

Feeder Cattle Within The Global Economy

Worldwide consumption of beef approaches aroundBeef production creates millions of jobs including suppliers, distributors, and retailers. Feeder cattle are a vital part of the global ecosystem of beef production and an important commodity in world markets.

How Are Feeder Cattle Raised?

Cattle have various use cases over the world. Here are the most common categories with examples of what cattle-derived goods are used for:Producing feeder cattle is a complex, high-stakes business. Successful production relies on proper animal husbandry techniques as well as good economic decision-making.Ranchers begin the process by breeding

Top Beef And Veal Producing Countries

Here is a list of the top beef and veal producing countries:

Thriftiness

Feeder cattle must be deemed “thrifty” in order to receive frame and muscle scores. “Thrifty” is a term used to describe cattle that can grow and develop normally according to beef industry expectations for growth and marbling. Unthrifty cattle are either unhealthy or genetically unfit for optimum growth and development of marbling. Examples of unthrifty cattle are those with double muscling, severe emaciation, or a leg injury that would prevent proper weight gain. Neither example would fit the USDA frame score standards. Cattle that are determined to be unthrifty are graded U.S. Inferior. If a calf completely recovers from a disease or injury, the calf can be graded at that time.

Frame Score

The USDA feeder cattle frame scores are “small” (S), “medium” (M), and “large” (L), as seen in Figure 2. Largerframed cattle generally have a higher rate of gain, require more time on feed to reach the same finish or fatness, and will attain a heavier slaughter weight. Depending upon feed prices and cattle supply, the demand for larger frame cattle can vary slightly, but typically, upper-medium to lower-large framed cattle have reaped the highest prices compared to lower-medium and smaller-framed cattle. The key to understanding how frame-scoring works is to understand what frame scores ultimately predict. Frame scores predict the potential weight range (Table 2) of a given steer or heifer when it has reached its compositional endpoint of around 0.5 inches of external fat and potentially grade “low choice” or higher. Thus, a frame score can help communicate the potential endpoint value differences that exist between each calf for the buyer and seller. It should be noted that over the past two decades, there has been an increase in average carcass weight of over 100 lbs. This is a reflection of feeding larger framed cattle in addition to growth implant strategies.Cattle graded as “large framed” are expected to weigh over 1250 lbs. when their external fat is approximately 0.5 inches at the 12th rib. This is the location where beef carcasses are “ribbed” to expose the ribeye cross section for grading purposes (Figure 3). The 0.5-inch target is used in the USDA standards as a reasonable live animal predictor of a calf’s ability to grade “low choice” or higher.Cattle buyers or graders evaluating 500-lb. feeder calves are estimating the growth indicators that help predict final endpoint weight. Buyers and graders use a combination of the criteria in Table 3.For example, a feeder calf with a long, coarse tail, large head, and wide muzzle weighing 500 lbs. is older, or earlier maturing, and will have less genetic ability for gain compared to a 500-lb. calf that is longbodied, short-tailed, and fine-haired. The more youthful-appearing calf should have more growth potential and ultimately have a higher yielding carcass with less trimmable waste. Although yield is important, large-framed cattle tend to have less genetic potential for marbling compared to smaller-framed cattle. A finished steer or heifer that has both an acceptable yield grade and a desirable quality grade is a difficult balance. However, genetic selection for marbling in purebred herds has made this more achievable and has improved the industry’s percentage of cattle grading “low choice” or better.Small-framed cattle will generally receive much lower prices throughout the beef chain and produce poorer yielding carcasses with more trimmable fat. Today’s industry severely discounts lightweight carcasses (under 600 lbs). Excessively finished carcasses with yield grades of 4 and 5 also receive heavy discounts.

Muscle Scoring Feeder Cattle

USDA feeder cattle muscle scores (MS) are either “1,” “2,” “3,” or “4” based on subjective assessment of a trained grader (Figure 4). They are used as common terminology within the industry to communicate differences in muscle. Muscle scores with a lower numerical value indicate greater amounts of muscling. Feeder cattle with a muscle score of 1 are highly marketable cattle that are expected to have carcasses with a larger ribeye, less fat and consequently a more desirable yield grade (U.S. Yield Grade 1 or 2).Muscle thickness refers to the development of the muscle system. USDA feeder grade standards describe “MS 1” as moderately thick and comprised predominantly of beef breeding. An “MS 2” is described as slightly thick with a high proportion of beef breeding. An “MS 3” is described as thin throughout with the legs close together. The “MS 4” score was added in the standards revision of 2000. An MS 4 is described as having less thickness than an MS 3. Cattle receiving an MS 3 or 4 would have a dairy type appearance. An MS 4 is not common.Muscle has a rounded shape when in abundance (No. 1, or MS 1, in Figure 4). Jorgenson’s Muscling Theory is a good way to help visualize the ideal muscling of an MS 1 or upper MS 2. This concept is often used by USDA graders to teach muscle scoring. Cattle that look more circular from a rear view exhibit greater muscling. By comparison, cattle that are lightly muscled more closely resemble an inverted triangle (Figure 5).Cattle receiving a MS 1 or upper MS 2 more optimally meet industry standards for yield grade. Yield grades are used to group carcasses according to the expected amount of boneless, closely-trimmed retail cuts. Cattle with less muscling in the hip and hindquarter will typically yield a smaller ribeye and deposit fat more quickly. Carcasses with below-average muscling are subject to receive poor yield grades (U.S. Yield Grade 4 or 5) that receive discounts on a grid-pricing system.Flesh Flesh score (FS) will also influence feeder calf value. USDA uses the term “flesh” to describe differences in external fat. However, it is not a part of USDA grade standards, as it can change over time and is more dependent on nutritional environment. Calves with excessive flesh within a given frame and muscle score will typically have a lower sale price. These cattle are heavier than ideal at a given weight with less opportunity for additional gain in the next phase of the beef chain. Figure 5 displays the visual effect of additional fat deposition on feeder cattle for both heavy and light muscled cattle. Heavily muscled calves with excessive flesh appear less circular and exhibit a square-like shape at a rear view. An MS 1 feeder calf with excessive flesh will appear to have a less rounded shape due to the fat deposits that develop in the upper hip and lower quarter. Likewise, lightly muscled cattle with excessive flesh will also be squarer upon the rear view.USDA Feeder Cattle Standards do have a scale for flesh that ranges from 1 to 9. Flesh scores are much like the body condition scoring scale for mature cows. Neither excessively thin (FS 1, FS 2) or fleshy cattle (FS 6 through FS 9) are ideal from a marketing perspective. Overly thin calves will have three or more ribs that can be easily seen. Overly thin cattle are discounted for their lack of gain potential whether genetic or due to previous management. Thrifty calves with a flesh score of 3, 4, or 5 offer more gain-profiting potential in many traditional marketing venues. Thus, flesh scores should be a consideration for cow/calf producers when making decisions about creep feeding or preconditioning programs. Calves may become too fleshy and negate any additional weight gain due to creep feeding, particularly for medium- and smal-framed feeder calves. Refer to UGA Extension Bulletin 1315, “Creep Feeding Beef Calves,” for more information.

Sex Classification

When grading feeder calves it is also necessary to understand the differences among heifer, bull, and steer calves. Male cattle tend to grow and stay leaner for a longer period of time considering that all other factors are equal. This explains that steers and bulls bring a premium when compared to heifer calves. It should also be noted that steers (castrated males) will bring a premium compared to bulls (intact males) if all other variables are constant. Steers bring a premium versus bulls, as they are already prepared for the remainder of the commercial beef chain. Bull calves will have to be castrated before entering the feedlot segment. Castration prior to the time of marketing has long-term benefits for health and performance.Research confirms that bulls will have diminished gains and increased sickness due to the stress of castration (Massey et al., 2011). Stocker operators may choose to purchase feeder bulls. They are assuming the risk and capturing the value of marketing healthy feeder steers at heavier weights. Table 4 shows the price differences reported by a USDA Market News summary of five weekly auction sales across Georgia during September 2016. Table 4 demonstrates the value difference that exist in bulls verses steers. Prices reported at this time show that steers were valued as much as $5 more per head in comparison to their steer counterparts.

Summary

Feeder cattle buyers, marketers, and producers are able to better communicate the growth and carcass merit potential of individual and grouped calves using the USDA Feeder Cattle Grading Standards. Producers that are aware of these standards and their use in predicting carcass value are better suited to making breeding and management decisions to improve the value of future calf crops. Feeder calf grades can be used within individual herds to provide insight for herd sire selection. Appropriate sire selection can quickly reduce the number of small-framed or MS 2 or 3 calves in a producer’s calf crop. For more information on feeder cattle grading, contact your local Extension office at 1-800-ASK-UGA-1.