Agriculture & Natural Resources
Kentucky Auction Prices ($ per cwt) for 550# medium and large frame #1-2 steers. (USDA-AMS, LMIC, Dr. Kenny Burdine)
Feeder cattle market continues to hold steady
Source: Dr. Kenny Burdine; UK Livestock Economist Sometimes it’s necessary to step back and access where the market is without getting distracted with the constant changes that are happening on a daily basis. If you had asked me this time last year how I thought fall 2018 cattle prices would compare to fall 2017, I would have very quickly told you that I thought price levels would be lower in 2018. The primary reason for this expectation was supply.
Those increased supply expectations have come to fruition, but prices have largely held near last year’s levels.
While production forecasts have evolved throughout the year, production levels of all major meats have been moderately higher for 2018. Beef, pork, and broiler production is forecast by USDA to be up by 2.9 percent, 3.3 percent, and 2.2 percent, respectively, for 2018. Holding everything else constant, this is typically a recipe for lower prices. But the market has largely absorbed these production increases. Part of the reason has been strong export levels. Despite some trade barriers that have been in place since summer, beef exports have been above 2017 levels all year. This, coupled with a relatively strong US economy, has largely supported beef prices, and in turn cattle prices. In addition to what was mentioned previously, calf markets have also benefited from good fall forage growth, which has spread fall calf runs out more than usual. When this article was written, I just had three weeks of October prices to include. There is about a $3 per cwt drop in prices from September to October, which puts October 2018 prices within $0.50 per cwt of October 2017.
In many ways, I have actually been more surprised by how high heavy feeder cattle prices have been. A lot of large groups of 800-900 lb. steers are still moving in the $150s and I would make an important point that applies very often in the fall. Heavy feeders moving now are still being sold based on spring CME© Live Cattle futures prices. At the time this was written (Oct. 23), April CME© Live Cattle futures were trading at about an $8 premium over the June contract. As we move towards the end of the year, June will become the driver of our heavy feeder cattle market, rather than April. And, unless something else fundamentally changes in the market, the current prices levels are likely to be unsustainable for heavy feeders as their expected sale price when they come off feed will be much lower.