Seasonals Point To Higher Feeder Cattle Prices

Based on seasonal trends, feeder cattle prices in the Southern Plains should continue rising into July where they will flatten into fall.

The market for younger calves, however, could soften as the push to obtain grass calves subsides seasonally and the market focus turns to feeder cattle, said Andrew Griffith, agricultural economist at the University of Tennessee in his Tennessee Market Highlights.

“Producers should take advantage of the price strength in the market,” he wrote.  “The spring run-up in prices has provided producers an opportunity to sell inventory at a strong price today or to use a price risk management tool such as Livestock Risk Protection insurance, futures or options to solidify a market price.”

Forecasting whether the current market strength for calves will continue is difficult, Griffith said.

“One way of looking at the price strength today is that it was a correction from the severely underpriced animals of fall 2016,” he said.  “Alternatively, one could view the relatively strong prices of today as overpriced cattle.  However, calves and feeder cattle appear to be appropriately priced based on deferred live cattle futures contracts.

“There could be some support for the argument that today’s feeder cattle are somewhat undervalued given the strong cash value of finished cattle relative to the live cattle contract,” he said.

 

FEEDER PRICES FOLLOWING SEASONAL TREND HIGHER

 

Unlike last year when feeder cattle markets declined amid growing supplies and anticipation of more to come, feeder cattle prices this year are following the direction of the 2011-through-2015 average.

Feeder cattle prices this year are running consistently below the average, but the weekly directions are almost the same.

Last year, prices followed the average into late March before working consistently lower into an October bottom.

 

CALF PRICES FLAT TO WEAK

 

Griffith’s outlook for price weakness on grass calves in coming months could be related to seasonal trends as well.

Prices fell off last year for the same reasons that the 700- to 800-pound feeder cattle declined:  rising supplies and anticipation of even more supply gains.

In reality, it is not known whether prices will follow the seasonal trend or last year’s declines from here on.  But since prices so far have tracked the average, albeit at a lower level, it seems safer to assume they will continue to follow the average.

 

CASH CATTLE UP $4 TO $5

 

Cattle traded on the livestock exchange at an average of $128.60 per cwt, up $2.60 from last week, but fewer than 1,000 passed under the gavel.  Subsequently, cash cattle traded in a range from $129 to $133 per cwt on a live basis, mostly $130 to $133, up $4 to $5, and at $210 on a dressed basis, steady to up $2.

The USDA’s choice cutout Wednesday was down $0.82 per cwt at $215.17, while select was off $0.20 at $202.00.  The choice/select spread narrowed to $13.17 from $13.79 with 84 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Tuesday was $136.64 per cwt, up $0.03.  This compares with the Apr settlement Wednesday of $138.67, unchanged.