Feeder Cattle Prices Could Weaken Further

Feeder cattle prices are trending lower in the long run as prices this week struggle to maintain average values.

The effect of rising supplies of feeder cattle is being seen in a graph of feeder cattle prices.  Prices last year responded by moving lower as cattle were pulled off pastures that were going dormant and were sent to the feedlots.  Prices this year appear to be weakening counter-seasonally and are ready to head into the period of last year’s greatest weakness.

Data from the USDA’s Agricultural Marketing Service show the trend.

The 2010-2014 price trend for 700- to 800-pound Southern Plains steers shows a gradual upward movement through the year with a tiny dip in December.

However, a five-year span of prices likely doesn’t tell the whole story.  Feeder cattle prices are highly subject to supply, and the industry was in a retraction mode for many years.  This only ended two years ago for many and last year for some.

That means the five-year average price will show an increase through the year as feedlots vie for available calves to place on feed, and comparisons with last year when the industry was expanding its total herd may be more valid.

 

COMPARISONS WITH LAST YEAR

 

Southern Plains 700- to 800-pound feeder cattle prices last year extended the December dip through January and then made a gradual recovery into a late-June high of $232.43 per cwt.  From there, they declined steeply into a late-December bounce.

The second-half price decline was due largely to an influx of feeder cattle coming to market.  A larger cow herd two years ago produced a larger calf crop.  As these calves left pastures that start going dormant in mid-summer, supplies at the auction barns increased, and prices declined.

Further additions to the auction-barn supply served to pressure prices through the fall.

Through the first half of this year, Southern Plains calf prices have shown a tendency to weaken and not strengthen as they did last year, especially in the second quarter as calves came off wheat pastures.  Further pressure might be expected to ensue as grass pastures give out seasonally.

Generally, that same trend is appearing in other parts of the US.  Prices for Those same 700- to 800-pound steers are working lower Billings, Mont., South Dakota, Georgia and Washington state, according to USDA-AMS data.

In each case, prices last year generally followed the direction of the Southern Plains in a more exaggerated second-half decline.

Then if feeder cattle supplies follow the same direction as last year and go up, prices likely will decline more sharply from now through the end of the year.

 

CASH CATTLE QUIET

 

Cash cattle markets Thursday were $3 to $4 per cwt lower on a dressed basis in Iowa, trading at $191 to $192.  In live-basis markets, bids were posted $3 lower at $119 with asking prices at $200.

Cattle last week were up about $6 per cwt at mostly $122 live within a range of $116 to $123.  Dressed prices were up mostly $10 at $195 with some early at $185.

The USDA’s choice cutout Thursday was $0.97 per cwt higher at $210.05, while select was up $0.05 at $196.98.  The choice/select spread widened to $13.07 from $12.15 with 117 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $142.34 per cwt, down $1.51.  This compares with the Aug settlement Thursday of $143.62, down $0.95.