Winter weather generally brings a bigger grocery bill for cattle producers.
Andrew Griffith, Extension ag economist with the University of Tennessee, says with much of the country enduring a snowstorm over the weekend, feed costs will rise and cut into the bottom line.
“This week brought some strong signs of winter, and it proved to be in full force with cold nights and cool days,” he writes in his weekly market outlook. “Harsh winter temperatures can sometimes weigh on producers, as cattle feed needs generally increase with lower temperatures, which results in increased hay usage and sometimes energy supplementation.
“As feed usage increases, so do winter feed costs, which will negatively influence returns to the cattle operation.”
Griffith says there is a tightrope producers walk when feeding during the winter.
“Overfeeding cattle will result in increased feed costs with little to no improvement in production parameters, while underfeeding animals could negatively influence growth and reproduction,” he says. “Though winter has reared its ugly head, the turning of the calendar to a new year is generally a welcome sign as calf prices tend to start slowly increasing.”
Griffith says calf prices should increase steadily into early April.
“The expectation is for 500-pound steer prices to peak near $160 per hundredweight with a first quarter average price of $155,” he says. “The $160 price is a couple of dollars lower than the 2018 apex, but the calf and feeder cattle markets may be under pressure the next three to four months as industry participants attempt to figure out the fed cattle marketing schedule.
“The feeder cattle market may end up receiving a more direct blow than the calf market in the near term as calf buyers continue to bet on the come. However, the calf market will not be immune to the pressure.”
Griffith says cattle feeders are swimming in black ink and continue to be aggressive when it comes to marketing prices.
“At the same time, cattle feeders are not in any mood to bid up feeder cattle due to the severe discounts in deferred live cattle futures,” he says.
“The feeder and fed cattle spread is certainly the dichotomy present in today’s market. The feeder-fed cattle spread is not at a record level by any stretch of the imagination but it has narrowed tremendously since the end of October. If profits continue in the feedlot then some of those dollars will eventually be passed down.”