Agricultural News
OSU's Dr. Derrell Peel says to Expect Changes in Feeder Cattle Markets this Fall
Mon, 29 Aug 2011 11:07:19 CDT
August feeder cattle prices are usually near the seasonal peak with prices dropping from through the remainder of the year. At least, that is how feeder prices have averaged over the last 10 years. In Oklahoma, 525 pound Medium/Large Number 1 steers are currently about $140.00/cwt. The ten-year average price index would suggest a November low about $10-$12/cwt lower than current prices, Heavier feeder steers (727 pounds) are currently averaging $137.00/cwt. and would drop seasonally by $4-5/cwt. into November.
Can we expect typical seasonal price patterns this fall? According to Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, there are several factors that may modify this seasonal price pattern. First is that seasonal price patterns may be changing. Over the past 10-15 years, feeder price patterns have changed from spring peaks to summer peaks in seasonal prices. The seasonal peaks in calf prices this year were in the spring, although heavy feeders have peaked in price this summer. Over time, one of the impacts of high feed prices is likely to shift the industry back to spring price peaks.
The next factor is corn prices. Feedlot ration costs are very close to a level where feeder cattle have to trade at even money to fed cattle in order to have a feedlot breakeven. This won't necessarily happen immediately, but over time, continued high prices of corn will limit feeder prices, especially at heavier weights. A spike in corn prices this fall could push feeder prices lower, not for normal seasonal reasons but lower nevertheless.
The third factor is the drought. The southern drought has changed both supply and demand prospects for the fall. The dry conditions at the current time limit any prospects for wheat pasture this fall and winter. Normally, this lack of demand is bearish to stocker prices. However, the drought has also caused significant early marketing of calves in the Southern Plains. There will likely be a significantly smaller fall run of calves, which may offset the lack of wheat pasture demand. Thus, it is not clear whether the net impact on prices will be positive or negative. My expectation at this time is for little or no seasonal price pressure on calves and stockers this fall beyond the pressure already noted on stocker prices in this region.
The final factor is some significant region differences due to variable weather across the country. Calf prices in Oklahoma are currently about 10 percent lower than in Nebraska, which is a larger than normal spread between the two regions. This no doubt reflects the additional pressure from the drought in the south compared to the excellent forage conditions in the northern half of the country. The difference in heavy feeders is more typical, about 3-4 percent higher in Nebraska compared to Oklahoma.
With regionally larger supplies in the north, one might expect more of a seasonal tendency in prices this fall but abundant forage supplies and the continuing incentive for forage based gains may increase stocker demand in the north that offsets the lack of stocker demand in the south. The bottom line is that seasonal price pressure should be less than normal this fall, especially for calves.
Our thanks to Dr. Peel for providing this latest analysis of the cattle market- it's a part of the weekly Cow Calf Corner electronic newsletter that Dr. Peel and Dr. Glenn Selk of OSU produce on most Mondays.
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