The Southern Plains feeder cattle market is holding within a narrow range, but is expected to wane as spring calves begin coming to market over the next several months.
However, Andrew Griffith, extension agricultural economist at the University of Tennessee, said the feeder cattle market is getting some support in the form of rising wholesale beef prices, firm fed cattle prices and feeder cattle futures prices. This may limit cash supply linked feeder cattle price declines.
In the longer term, cow/calf producers likely will continue to enlarge the beef cow herd, pumping out more calves each year as cows and heifers are retained.
“The cow/calf producer will not know how many beef cattle are needed until the market price for calves and feeder cattle starts to erode in the coming years,” Griffith said.
Nearly all data, including cow slaughter rates, heifer slaughter and cattle inventory currently point toward fairly rapid growth in the beef cattle herd for several more years, he said.
Griffith cautioned cow/calf producers to guard their enthusiasm for expansion, saying the heifers being retained or purchased now and in the near future will be in their peak production years when feeder cattle prices begin to erode.
At that point, industry price leverage will shift to the feedlots, working its way through the industry until the consumer signals there is has more than enough beef.
FED CATTLE LOW IN PLACE
It appears the fed cattle price low was set three weeks ago when Southern Plains prices averaged $144.99 per cwt. By last week, they had risen to $150.06.
That also could have been the annual low. A look at the 2009-2013 average price shows the market tends to make two bottoms each year – one in January and one in late July/early August.
Cash cattle prices this year and last year have shown the market’s propensity for winter and summer lows. They’ve just done it in different years.
Last year, the annual Southern Plains live cattle low was set the first week of the year. A late spring/early summer decline never challenged the January low.
This year, the first-week-of-January price of $169.71 per cwt has been the annual top. This was challenged the last week of May, but from there, the market has worked down into the latest low three weeks ago.
It could be argued that the latest bounce could be just another in a series of bottoms in a bear market. Rising fed cattle numbers could thwart the market’s attempt to turn higher.
That’s possible, but market analysts are relying on the seasonal trend toward rising product demand to lift prices. Already, consumers are showing a shift back toward choice-graded beef.
This year’s choice/select price spread bottomed almost a month early as meat buyers attempted to secure Labor Day grilling items. Once turned, the choice/select spread has a very strong seasonal tendency to widen into early December.
CASH CATTLE MARKETS SIGNAL STRENGTH
Cash cattle markets Thursday showed signs of strength with scattered trade in Nebraska’s dressed market at $240 per cwt, up $2 to $4 from last week. Live-basis markets have yet to trade with bids at $147 and asking prices at $153. Last week’s live-basis market was mostly $150.
The USDA reported mixed boxed beef prices Thursday with choice up $1.07 per cwt at $245.09 and select down $0.32 at $235.13.
Volume was light with 82 loads being sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Wednesday was $216.69 per cwt, down $0.14, compared with Thursday’s Aug futures contract settlement of $214.02, up $0.15.