Most cattle sectors have some seasonality in prices because of biology, feedstuff growing seasons and climate, said Matthew Diersen, risk and business management specialist at South Dakota State University in a Livestock Marketing Information Center letter called In The Cattle Markets.
Seasonalities tend to be reflected in futures prices when contracts across expirations are examined, Diersen said. However, futures prices generally are unbiased, and there is seldom any seasonal pattern for a given contract.
FED CATTLE SEASONALITIES
Fed cattle cash prices have a pronounced seasonal high in March through May with a low in September or October, Diersen said. This pattern is consistent in Southern Plains cattle and in northern markets.
That tendency cannot be ignored, he said. When hedging or negotiating prices, the basis will reflect the underlying seasonal pattern relative to a futures price.
For example, the basis in Worthing, SD, was very high in May 2023, reflecting a seasonal cash premium compared to the June futures price, Diersen said. Basis in 2024 would be expected to be $2-3 per cwt negative before March and after September in northern locations.
Basis also can be expected to be positive and peak close to $10 (positive) in May, he said. Southern locations would not have as favorable levels.
FEEDER CATTLE SEASONALITIES
Seasonality in feeder cattle cash prices is less pronounced, Diersen said. It tends to be low in February and March before peaking in late summer.
Seasonality also is region-specific, with the Southern Plains peak occurring in August and September, while in South Dakota the peak tends to be in July, he said. Seasonality does not have a clear effect on basis for feeder cattle that needs to be managed or accounted for.
The basis on feeder cattle in South Dakota tends to be around $5 more than futures most months of the year (although it stays closer to $2 in January and February), Diersen said. The basis for southern locations tends to be more variable and often negative instead of positive.
CALF SEASONALITIES
For calves or stockers, the seasonal pattern in cash prices is for a slight high in June through August with a slight low in January and December in South Dakota, he said. The high occurs when sales volume is very low in the summer months.
In contrast, in the Southern Plains it is more likely to see a slight high in March and a slight low in October, Diersen said. Like feeder cattle, the basis for calves does not have a pronounced seasonal pattern in South Dakota.
The five-year average has been around $35 above futures, being a little higher in March and a little lower in October, he said. The seasonality tends to be more pronounced for other locations around the US.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $175.14 per cwt to $175.86, compared with last week’s range of $171.36 to $176.16 per cwt. FOB dressed steers, and heifers went for $274.18 per cwt to $275.62, compared with $270.35 to $278.11.
The USDA choice cutout Monday was down $1.11 per cwt at $299.42 while select was down $0.31 at $288.82. The choice/select spread narrowed to $10.60 from $10.60 with 55 loads of fabricated product and 13 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were up $0.02 to $0.05 at $1.35 to $1.49 a bushel over the Mar corn contract, which settled at $4.40 1/4 a bushel, down $0.06.
The CME Feeder Cattle Index for the seven days ended Friday was $234.15 per cwt, up $2.09. This compares with Monday’s Mar contract settlement of $238.62, down $1.07.