In this guide to understanding feeder cattle as a commodity, we’ll explain why it’s valuable, what it’s used for, how it’s 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.
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Why Are Feeder Cattle Valuable?
Cattle are a valuable commodity across industries like agriculture, clothing, sporting goods, and even musical instruments.
Feeder cattle are weaned calves that reach a weight of between 600 to 800 pounds. At this point, cattle producers feed them a diet of high-energy feed to promote weight gain.
Ultimately, when they reach a weight of about 1,200 to 1,400 pounds, feeder cattle are slaughtered to produce beef.
Feeder Cattle Within The Global Economy
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.
Main Uses of Feeder Cattle
Cattle have various use cases over the world. Here are the most common categories with examples of what cattle-derived goods are used for:
|Use of Cattle
|Hamburgers, steaks and roast beef are among the many products produced from beef.
|By-products of beef production include the following:
|Beef hide is used to make a variety of items:
|Non-Food Uses (Beef Fats and Fatty Acids)
|Some industrial oils, lubricants, soaps, lipsticks, face creams, hand creams, chemicals, pesticides and detergents derive from beef fat products.
|Bones, Horns and Hooves
|Buttons, piano keys, glues and fertilizers are some of the many products made from bones, horns and hooves of cattle.
How Do Ranchers Produce Cattle?
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 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.
Feeder Cattle Breeding Process
A natural breeding process generally requires one bull for each 20 to 25 cows. Many producers prefer A.I. because they can better control the genetics of the calves.
Ranchers must allocate a set amount of acres of pasture or grazing land for each cow and its calf offspring. This set amount of land is known as the stocking rate, and it varies from region to region based on weather conditions and maintenance procedures.
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.
A group of cows on a ranch is called a herd. Each cow generally gives birth to one calf, although some may occasionally produce twins. Not all cows conceive; weather, disease and nutrition can all affect conception rates.
Cattle Culling and Slaughtering
Each year ranchers typically cull about 15 to 25% of the cows in their herd and send them to slaughter. The most common reasons for culling a cow include:
- 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. The remaining calves are raised for eventual slaughter.
How Are Feeder Cattle Raised?
The timeline for raising feeder cattle is as follows:
- 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.
- Six to eight months of age: Calves typically weight 500 to 600 pounds at this stage. Ranchers wean the calf from the cow. Some very heavy calves go directly into feedlots, but most pass through stocker operations.
- 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. This phase generally lasts between six to 10 months.
- Feedlot: A rancher with feeder cattle has three options:
- Continue to raise the cattle on the rancher’s property until they reach the designated weight for slaughter
- Send the cattle to a commercial feedlot. A rancher would retain ownership of the cattle while the commercial feedlot feeds them.
- Sell the feeder cattle to another rancher or feedlot operation.
Feeder cattle receive high-energy feed to promote weight gain. They are usually either steers (castrated males) or heifers (females that have not given birth).
Cows (females that have given birth) and bulls (sexually intact males) generally are kept for production and not placed in feedlots.
What Drives the Price of Feeder Cattle?
Some of the specific factors that move feeder cattle prices include:
- Feed Prices
- Global Demand For Beef
- Energy Prices
Historically the price of livestock feed, especially corn, is inversely related to the price of feeder cattle.
The rationale is that as the cost of producing the “finished” animal declines, buyers are willing to pay more for the “intermediate” product.
Corn is such an integral part of the process of raising feeder cattle that many ranchers and others dependent on cattle prices will hedge their exposure to this risk.
Traders looking to speculate on feeder cattle prices should keep a careful eye on grain markets and the factors that influence grain prices.
Weather can affect feeder cattle prices in several ways. First, weather has a big impact on grain prices.
Severe drought conditions or excessive cold spells can diminish grain supply and send prices higher. This, in turn, usually has a negative effect on feeder cattle prices.
Weather can also directly affect the process of raising feeder cattle. Excessive heat can lower cattle appetite and lengthen the time it takes to produce fully-fed cattle.
Global Demand for Beef
Beef is a discretionary item and generally more costly than other animal and vegetable food sources.
Demand for beef is historically correlated with overall wealth. As emerging market economies have grown wealthier, beef consumption has risen.
Similarly, in developed economies, the level of beef consumption has often been tied to overall economic growth.
Therefore, feeder cattle traders should pay attention to metrics such as GDP growth and unemployment for clues about future feeder cattle prices.
Foreign importers of US agricultural produce also drive the price of feeder cattle. China, Canada, and Mexico account for the three largest destination countries for US agricultural exports.
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.
Other factors that could lead to substitution are the discovery of diseases in cattle such as Bovine Spongiform Encephalopathy (BSE or mad cow disease).
The energy required to raise cattle far exceeds that of other food sources. By some estimates, raising beef requires 10 times the resources needed to raise poultry, dairy, eggs, and pork.
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. Ultimately, the price of oil, natural gas, coal, and other energy sources can greatly impact beef prices.
Top Beef And Veal Producing Countries
Here is a list of the top beef and veal producing countries:
|Beef and Veal Produced per Year (1,000 Metric Tons)
|United States of America
What Do Experts Think About Cattle?
Experts generally have a pessimistic outlook about feeder cattle prices. One analyst cites the abundant supply of three sources of meat – poultry, pork, and beef – as reasons to sour on the market:
All three of the major meats are in expansion mode, and that’s scary.
– Randy Blach, CEO CattleFax
Another expert concurs. Jeremy Klassen, manager of the Canadian office of Swiss-based grain trader GAP SA Grain Products Ltd., believes growth in the calf crop signals problems for the market:
…the 2017 calf crop was estimated at 36.5 million head, up 3.5 per cent from the 2016 calf crop of 35.0 million head. The last time the U.S. calf crop was this large was back in 2007 when it reached 36.8 million head. We haven’t seen a sharp increase in the cow slaughter so the U.S. cattle herd continues to expand at a rapid pace.
– Jeremy Klassen, Manager GAP SA Grain Products Ltd.
Where Can I Trade on Cattle?
Start your research with reviews of these regulated brokers available in that offer stocks, ETFs or derivatives based on cattle and other agricultural commodities.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
If you’d like to learn about trading and speculating on feeder cattle prices, see our Feeder Cattle Trading Guide.