Feeder cattle futures may be presenting producers with a hedging opportunity, said Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, in the Cow/Calf Corner, a letter sent to Oklahoma Extension agents.
With generally good summer forage prospects, stocker cattle demand remains strong, Peel said. Lightweight feeder cattle prices have yet to confirm a seasonal price peak and may push slightly higher in the next 2-3 weeks.
In Oklahoma, prices for steers in the 500-pound weight class typically drop roughly 7% from the spring peak into July and another 4% to fall lows in October, he said. Large frame, No. 1 steers (500 pounds) currently are priced about $186 per cwt, suggesting an October low price of roughly $166.
Seven-hundred to 900-pound feeder steer prices have increased seasonally from the February low and typically rise to a summer peak in July before declining in the second half of the year, Peel said.
Current 750-pound, No. 1 steer prices are roughly $148 per cwt, suggesting a peak July price of roughly $153 and an October price near $148, Peel said.
Futures markets are more optimistic than that with prices for summer and fall much higher, providing that pricing opportunity for summer or fall feeders.
BETTER FORAGE CONDITIONS
Better forage conditions than last year have been reported across much of the Southern Plains as abundant winter snow and spring rains rejuvenate formerly parched soils, but fire danger remains, Peel added.
Peel warned, however, that wildfire risks still were there and will be higher in the next few weeks with warmer temperatures and strong spring winds. All that’s lacking is warm weather for ample spring pasture and hay growth.
“It was just about one year ago when western Oklahoma experienced wildfires that burned about 400,000 acres and caused millions of dollars in damage,” he said. “However, conditions were significantly different in April, 2018 with 34.85% of the state in extreme and exceptional drought conditions and just 41.72% of the state with no drought conditions.”
The latest Drought Monitor shows 95.94% of Oklahoma with zero drought conditions.
FED CATTLE PAST THE PEAK?
Fed cattle prices may have peaked on schedule in late March at nearly $129 per cwt, Peel said. However, continuing effects of winter weather will help support prices for weeks yet and may provide an opportunity to push to higher seasonal peaks.
If that happens, it likely would occur within the next two or three weeks, he said. Beef production thus far this year is down 0.7% year over year but weekly production the last four weeks has averaged 1.8% more.
Beef production typically increases from the first quarter to the third quarter, but the seasonal increase may be tempered by lower carcass weights and other weather-related factors.
Seasonalities indicate fed prices likely will drop to about $120 per cwt for fall lows, Peel said.
CATTLE, BEEF RECAP
Cash cattle trading was reported in the Plains at $126 per cwt with a few up to $128, steady to up $2 from last week. No action was reported in dressed markets with prices last week at $204 to $205 dressed, steady to up $1.
The USDA choice cutout Wednesday was up $0.71 per cwt at $232.76, while select was down $0.99 at $220.16. The choice/select spread widened to $12.60 from $10.90 with 139 loads of fabricated product sold into the spot market.
There were no tenders Wednesday for deliveries against the Apr futures contract.
The CME Feeder Cattle index for the seven days ended Monday, was $143.58 per cwt, up $0.112. This compares with Wednesday’s Apr contract settlement of $145.32, down $0.35.