A slight boost in feeder cattle prices last week was welcome news for producers.
Andrew Griffith, Extension ag economist with the University of Tennessee, says while those prices may or may not be meaningful, producers need to take small victories when they can.
“The reason steady and higher price trends this week should be considered positive is because many feeder cattle futures contract prices declined $8 to $9 per hundredweight since the close on Jan. 22,” Griffith says in his weekly market outlook.
“On top of that, many of the feeder cattle contracts are as much as $10 to $13 lower than their contract high, which was hit in the middle of January. It is good that the cash market has had a muted response to all of the white noise that is occurring in the broader electronic markets, because it could have really crashed the local cash market.”
Griffith says news items such as coronavirus and the impeachment trial of President Donald Trump are affecting all commodity prices. He says while it is easy to complain about these outside factors, complaints generally do not reverse market trends.
“Thus, producers have to be constantly cognizant of situations and events that could throw the market into disarray, and at the same time manage their market risk by taking advantage of the opportunities offered throughout the year,” Griffith said.
“This is easier said than done, but grabbing a profitable marketing price anywhere along the way will help to ensure another year of operating a cattle operation. The market should provide another chance for this year.”
Fed cattle prices were down last week, but that should have little impact on margins, Griffith says.
“The finished cattle market slipped a little this week, but the slip in the market will do very little to cut into cattle feeding margins that are very good right now,” he says. “It should not be surprising for finished cattle prices to soften during January and February when beef supplies are plentiful and when beef demand is seasonally soft.
“However, the April live cattle contract is offering very little hope of a price resurgence heading into the summer grilling season. Thus, despite strong margins at the feedlot right now, many cattle feeders are already focused on the spring and summer marketing time frame.”