Feeder steer prices shot up last week as movement at auction barns dropped in response to lower prices and news of rapidly climbing feedlot losses, but it likely isn’t a trend.
Cow/calf operators were said to be keeping feeder steers and heifers home to avoid selling at a loss for as long as possible. There also were links to a stronger futures market last week.
Yet, while keeping the young cattle on pasture longer may mean more pounds to sell per animal and thus more cash flow per head, backing them up at home while unemployment applications reach record heights isn’t helpful either, a market analyst said.
Data from the USDA’s Agricultural Marketing Service that was compiled by the Livestock Marketing Information Center in Denver showed that weekly average prices for 700- to 800-pound medium and large No. 1 feeder steers in the Southern Plains rose last week to $136.77 per cwt from $122.29 the week before, a gain of $14.48, or 11.8%.
However, Southern Plains feeder steer prices last week were down $9.00, or 6.17%, from $145.77 in the same week a year earlier and down $31.17, or 18.6%, from the 2014-2018 average for the week of $167.94.
MARKET VOLATILITY OFF-PUTTING
Reading and predicting current feeder cattle markets is off-putting to many cow/calf producers because of the extreme volatility, said Andrew Griffith, agricultural economist at the University of Tennessee in a weekly letter called Tennessee Market Highlights.
“Much of this stronger undertone is likely associated with the strong week that feeder cattle futures experienced and the strong week for live cattle sales,” Griffith said. “Despite the stronger prices this week, the volatility in the futures market will keep many cattle producers on the sidelines as it should.
“In a market that is not influenced by outside market forces, it is difficult to accurately predict what is going to happen, which makes decision making difficult,” he said. “Decision making is made even more difficult when extreme volatility is introduced to the market from outside forces.
“Market volatility is not a big issue for producers who do not have anything that needs to be immediately marketed, because they are only experiencing a loss in value of a commodity,” Griffith said. “Alternatively, those who must market cattle in the near term may actually experience that loss in value.”
RISK MANAGEMENT URGED
Griffith continued: “Some may think this is an isolated event and discount the use of price risk management. However, if producers recall, one year ago the futures market was pricing August feeder cattle near $155, and when August arrived the same contract was trading in the $135 to $140 price range. This demonstrates the importance of managing price risk.”
REGIONAL PRICES DIFFER
Prices for those same feeder cattle in regions outside the Southern Plains reacted differently. LMIC graphs show prices in Billings, MT, and Washington state dropped the last two weeks, while they rose in South Dakota and Georgia.
Volatility can be confusing.
CATTLE, BEEF RECAP
Cash cattle traded in the Plains this week at $112 to $113 per cwt on a live basis, down $6 to $7 from last week. Dressed-basis trade took place last week at mostly $190, up $5 to $10.
The USDA choice cutout Thursday was down $2.53 per cwt at $232.64, while select was down $3.01 at $222.12. The choice/select spread widened to $10.52 from $10.04 with 76 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $126.09 per cwt, down $3.73. This compares with Thursday’s Apr contract settlement of $110.67, down $6.75.