NEWS
Cattle Market
Victoria G. Myers Progressive Farmer Senior Editor
Mon Aug 31, 2015 12:11 PM CDT
(Page 1 of 3)

Cut it any way you want. Beef's market bulls are starting to look like they're leaking a little testosterone.

There may be a little less bull in this fall's calf market, but the fundamentals still spell opportunity. (DTN/Progressive Farmer photo by Sam Wirzba)

True, the numbers still ring strong. USDA projects 2015 will close with average annual prices for feeder steers in the $216 to $221 range, an increase from the 2014 annual average of $202.82*. But there is a shift in the fundamentals. The industry is now at a place where market economists are encouraging producers to meditate on their cost of production -- usually a good indicator any party is almost over.

Texas A&M Extension economist David Anderson said today's market signals are definitely telling the industry to start paying attention.

"It's time to think about costs and where you are spending money. Focus on those things that bring you a return. When prices are good, it's easy not to worry as much about costs. But record-high prices don't last forever," he explained.

CALF MARKET SET TO EXPAND

Two factors are fundamental and crucial to the direction prices will take this fall and winter. Those factors are herd size and feed prices.

While tight supplies remain the overriding market factor, Anderson points out this year started with 2% more cows in the herd, and it's reasonable to assume that would mean 2% more calves.

As a result of increasing supplies, the economist projects an 8% to 10% decline in prices for 500- to 600-pound feeder steers. On 750-pound feeder cattle, he sees that decline at 13%. Those projections are for the last quarter of this year compared to the last quarter of 2014. USDA forecasts prices for feeder steers the last quarter of 2015 will range from $222 per cwt to $234 per cwt. For comparison, in the last quarter of 2014, prices held at $234.25 per cwt.

"We are still talking historically high prices," Anderson noted. "These would be the second-highest prices on record for the quarter after last year. So these are still darn good calf prices."

Corn prices will play a heavy hand in the direction calf prices head. In July, USDA reported 100 million fewer bushels of corn would be produced this year compared to 2014. Corn ending stocks for 2015-16 were projected at 172 million bushels lower. Season-average prices for corn to the producer had the commodity up 25 cents per bushel to a range of $3.45 to $4.05 per bushel.

Anderson said higher corn prices will increase feed costs to the point that feedlot operators will have to lower bids for calves.

"Last year, we benefitted from a big decline in feed prices due to the record-size corn crop. That helped fall calf prices go up counter-seasonally. This year, I don't think that will happen, although the market has been slow to respond to higher corn prices," he added.

That counter-seasonal upturn in fall calf prices last year left some producers who had forward-contracted feeling they'd left money on the table. This year, however, Anderson said he thinks a forward contract may offer opportunities.

"In a declining market, you might want to think more about forward-contracting. Whether it's cash or forward contracting, the key is to understand your costs and know what a good price is for you. What are you comfortable with? If you feel better having those animals forward-contracted, then that's a good move for you."

Another market opportunity, Anderson said, will be branding and/or preconditioning programs. He saie as prices decline, these will offer more potential upside to participants.

  PREVIOUS |   1    |  2   |  3  | NEXT 
Related News Stories
DTN Weekly Distillers Grains Update
Ask the Vet
Profit Niche
DTN Weekly Distillers Grains Update
Ask the Vet
Rethink Grazing
Ample Stocks Ahead
Feedlot Trends
DTN Weekly Distillers Grains Update
Ask the Vet