While calf prices in 2018 were similar to 2017 for most of the year, some weakness has appeared in the feeder cattle market in recent weeks.
Andrew Griffith, Extension ag economist with the University of Tennessee, says a softer market came later in the season than it usually does.
“The late appearance of a softer feeder cattle market actually helped support calf prices through the largest runs of calves this fall, but softer calf prices the past two weeks are a result of lower feeder cattle prices,” he writes in his weekly market outlook.
“With that said, what caused feeder cattle prices to soften the past couple of months? The strongest argument probably comes from a lack of presence of farmer feeders in the market. Farmer feeders generally become active in the feeder cattle market immediately following harvest, but harvest was delayed in many areas due to precipitation which has meant farmer feeders have remained on the sidelines.”
Griffith says now that harvest is over in much of the country, he expects interest from farmer- feeders to grow.
“Given the prior thoughts, it is assumed farmer-feeder purchasing may be more concentrated than in previous years, which in turn could lead to tremendous support in the feeder cattle market immediately following the holidays,” he says. “This methodology of thinking is not a guarantee of higher feeder cattle prices, but farmer feeder purchasing power gains strength with low corn prices.
“Understanding that this analysis expects higher prices for feeder cattle in the next couple of months, it should also be stated that downside risk compared to today’s price would appear very small.”
Fed cattle prices were mostly steady last week, with the five-area weighted average ending Thursday, Dec. 13, at $117 per hundredweight on a live basis, up slightly from the previous week but nearly even to prices a year ago.
Griffith says fed cattle prices have been increasing for the past month.
“The increase is supporting late-year finished cattle marketings, but many feedlots have turned their focus to the February and April contracts that have witnessed similar price escalations,” he says.
“The April contract is the focus for most of the cattle placed in October and November and heavy cattle placed in December.
“Despite cattle feeding losses on a cash basis, one would have to expect that many cattle have been hedged and others are being hedged now.”