By Dr. Kenny Burdine
Feeder cattle markets really gained some momentum during the first half of September. As I write this on September 15th, fall CME© Feeder Cattle futures had pushed up into the upper $150’s. Spring 2019 futures, which will drive our fall calf market, were trading in the low-mid $150’s. 550# steer calf prices in KY have shown very little seasonal drop from summer, still moving in the $152-$155 per cwt range on a state average basis. 850# steers were selling for $138 on a state average basis, but up into the $140’s in larger groups.
While I am certain there are many that are not happy with the current cattle market, I truly feel like the market has been incredibly resilient. Production of all three major meats are significantly higher in 2018 and I was very concerned all year how the increased per capita availability would impact prices. Put simply, the cattle market has held better than I thought it would. And, despite a lot of uncertainty surrounding trade, beef exports have remained very strong.
This month, I wanted to take a quick side-bar and talk about fed cattle markets. Historically, fed cattle markets reached a seasonal high in the spring, dropped rather sharply to June or early July, and pushed upward through fall and winter. But, that pattern had been slightly different for the last several years. The red line in the following chart shows the 5 market weighted average slaughter steer prices for 2012 to 2016. Note that the seasonal high is still occurring in the spring, but the market really drags though summer and has reached its low in the fall. While 2017 and 2018 show slightly different highs, both suggest this continued later low.
As an extension economist in feeder cattle country, I work with very few producers who sell finished cattle. However, every producer I work with is impacted by the fed cattle market. Feeder cattle are priced based on their eventual value as fed cattle and what it costs to get them there. Deferred live cattle futures, which drive current feeder cattle prices, are clearly impacted by changes in the spot fed cattle market. I have always felt like markets looked for this fed cattle seasonal low as they priced themselves for fall. The fact that is continuing to occur later in the year is likely adding a bit more uncertainty to our markets.
We are still a month away from traditional weaning time for spring calving herds. And, given the excellent pasture conditions, it is very likely that weaning times will generally be later and more spread out this year. This usually means that our seasonal lows in the calf market are higher than usual. Combining this with recent strength in spring 2019 CME© feeder cattle futures has me more optimistic about this fall market than I was several months ago. If these conditions hold, I really don’t expect much of a seasonal decline in calf prices this fall. I expect our fall calf market to be very similar to last year, which is pretty encouraging given 2018 production levels.
Source: osu.edu