Many cow/calf producers now have calves on the ground, so it’s a good time to discuss prices and to update marketing plans for the new-crop, said the Livestock Marketing Information Center in a letter to Extension staff.
Calf prices can be expected to behave in certain ways within a calendar year because of the seasonal production cycle, the LMIC said. Most US producers are weaning their calves in the fall, and many of these calves head straight to market forming the 500- to 600-pound calf market and setting prices for yearly lows in the fourth quarter.
Analysis of this seasonal pattern places the highest prices in March and April, the LMIC said.
The LMIC has data for the Western Kansas Auction dating back to 1973, allowing for a full 40 years’ worth of observation of this weight class of cattle. However, it’s important to keep in mind, genetics and focused management have allowed for calves to be weaned at heavier weights. Weaning a 550-pound calf was not always the norm.
Over time this auction market has had small changes, but the latest 10 years have proven quite volatile, the LMIC said. Using the seasonal index for individual years, the 2014 through 2016 period set the 40-year maximum and minimum index value for October, November and December.
Beginning in 2014, the US started a new cattle inventory cycle, and the herd grew 0.7% in 2015 after seven years of year-over-year declines, the LMIC said.
The following year (as of Jan. 1, 2016), cattle herd numbers jumped more than 3%, and in that October and November seasonal indices dipped to their lowest values in 40 years, the DATA showed. US cattle numbers had not grown this aggressively since the early 1970s.
The average upcycle inventory increase is about 1.6%, and the average down cycle year-over-year change is close to 2.0%, the LMIC said.
Currently, the US is in the second longest herd expansionary phase since the cycle that began in 1976, posting four straight years of annual inventory growth. Larger calf crops tend to pressure prices, particularly in the fourth quarter, LMIC economists said.
January of 2018 showed another 0.7% increase compared with the previous year, which would indicate that 2018 fall calf prices should be the low price point again during this year, the LMIC said.
So far in 2018, prices have been slightly higher than where seasonal indexes would suggest, up 3.2% for the first quarter. Higher-than-normal prices were not expected to hold through the year, however.
The ten-year seasonal index indicates more potential downside than upside moving through 2018, the LMIC concluded.
CATTLE, BEEF RECAP
There were no sales on the Livestock Exchange Video Auction Wednesday. Last Wednesday, 161 head sold for 1- through 9-day delivery at $122 per cwt, and 338 sold for 1- through 17-day delivery at $120.
Cash cattle trade was reported at $120 to $121 per cwt on a live basis, down $1 from last week and lightly at $195 dressed, steady with the upper end of last week’s range.
The USDA choice cutout Wednesday was up $0.88 per cwt at $218.53, while select was up $1.04 at $203.15. The choice/select spread narrowed to $15.38 from $15.54 with 108 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $138.20 per cwt, up $0.12. This compares with Wednesday’s Apr settlement of $139.85, up $0.75 and May’s close of $141.35, up $1.20.