Video sales strong on lower corn market
August 12, 2013
Ty Thompson of Northern Livestock Video and Billings Livestock Commission Co., and Lex Madden, co-owner of Torrington Livestock Markets and Cattle Country Video are in agreement that the early sales of feeder cattle on the video this summer have been strong.
"From one year ago, I would say that the market for calves is anywhere from $6 to $12 per hundred higher. Yearlings are probably anywhere from $5 to $10 higher," Madden said, regarding cattle selling in mid-summer for late summer or fall delivery.
Last year roughage costs were high, and corn was in short supply, putting a strain on the market, Madden said. "Obviously we've had more rain than a year ago across the Midwest. The drought was a major issue in several states last year."
Demand for calves this year has been great and for yearlings, excellent, he added. "I would say corn has dropped in the last 30 days and…this is only a guess…but I'm saying that they think the corn crop will be excellent and that corn will go even lower after harvest," he explained. "To tell you the truth, the feedlot guy and the farmer feeder has not made much money in the last 16 months. I'll be totally honest, I'm a little surprised we've got this demand after those losses." Madden said that while he expects demand to stay strong this fall, his "gut feeling" is that the market could "tail off" slightly going into fall.
"We've had a lot of new buyers, mostly smaller farmer feeders or new feeders with smaller lots," he said about the bidders on Cattle Country's most recent video sale. "We obviously normally see a lot of the big feedlots bidding on cattle but this summer I would say there are a few more smaller feeders and independents buying calves this year."
Madden does expect good demand into the fall run, though, saying that cattle numbers continue to drop. "I've seen reports that cattle numbers are the lowest they've been since the '40s or early '50s," he said. Historically, Madden has noticed that demand tends to be higher in the summer then mid-fall when the big numbers of calves show up in town. "I would say seven out of the last 10 years, the market has been a little higher in the summer than when the fall run is at its peak," he explained.
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Cattle Country Video sold 37-38,000 head of cattle at their most recent Monday sale, Madden said, and added that their next big sale will be Thursday, Aug. 29, at Haythorn Ranch, in conjunction with their upcoming horse sale.
Torrington Livestock hosts regular Friday sales, with special feeder calf sales every Wednesday starting in August and continuing throughout the fall.
Madden said that while the drought continues in parts of Wyoming, Utah, Texas and some other states, he expects feeder calf prices to remain relatively strong for at least the next three to five years.
"There should be good demand for females too if weather holds out," he said. But are "good" prices good enough? "My only concern with our industry is that nationwide, getting young people involved in agriculture is getting harder all the time. We have a lot of ready, willing and capable young people who would go into agriculture but it's a real problem unless they can inherit something. With the price of land, machinery and cattle, even with these prices, I'm concerned about how many people can get started." Madden said that as the average age of ranchers continues to increase and they retire, entire farms or ranches are often sold for development of some kind. Those acres go out of production, putting even more pressure on ag land prices.
Thompson agrees that the summer 2013 market is substantially higher than a year ago at the same time.
"For our July sale, this year, everything was about $10 higher than a year ago in July," he said, commenting that 500 pound steers contracted for October or November delivery brought around $1.68 to $1.72 per hundredweight last summer compared to about $1.80 to $1.90 per hundredweight and this year. "We are seeing prices comparable to what we saw early in the spring of 2012 before grain and roughage got high," he added.
In some ways, Thompson said it is surprising that cattle prices have taken a jump, in light of the losses most feeders have suffered recently. "It shows the resiliency of the feeding sector," he said.
"I have contended over the last year, that there is nothing wrong with the fed cattle market, the only problem was that our feed was too high." Fat cattle prices have been at an all-time high, he said. "I think the big jump in the feeder cattle market is because these feeders realize that this fat cattle market will probably stay high so with the prospect of lower feed costs, there should be a better profit margin for the feeders."
"The corn crop looks to be tremendous, the weather has been conducive so far and the supply of feed in general looks a lot better than last year," said Thompson, who auctioneers for Northern Livestock Video, Billings Livestock Commission and PAYS, in Billings, Mont.
"The weather is a big variable," he explained. If corn harvest meets expectations, the strong market for feeder calves should continue. With continued shorter supplies of cattle, "it's not like we have to worry about an over-supply of cattle. We have to worry about feed more than anything," he said. Growing the export market will also help feeder cattle prices, he said.
Thompson explained that because of adequate moisture this year, producers are not selling or weaning calves earlier than usual or changing their marketing strategies significantly. "We are only selling calves on the video now. We won't have calves come through the stockyards until September," he said. "Everyone's in fairly good shape and our deliveries and weights should be normal this year."
About 50,000 head of cattle – mostly feeder cattle – and about 9,000 head of sheep are consigned for the next Northern Livestock Video Auction sale Aug. 19-20.
A couple of reasons that video sales continue to gain popularity, Thompson explained, is that commodity prices (feeder futures) tend to rally during the summer months, improving the outlook for feeder calf prices. Plus farmer feeders like to plan ahead and have cattle set for fall delivery off one ranch, alleviating the stress of buying cattle in the fall. Ranchers also enjoy the security of locking in a price obtained in an open competitive manner, he said.
Thompson believes that about half the time the live cattle market during the fall run is stronger than the summer video market, and half the time, it goes the other way. "It's about 50-50, if you compare similar load lots and such," he said.
Cattle from the northern region of the country are of good quality, Thompson said. "We like to think that our genetic pool is stronger from more years of genetic testing, more years of performance testing, plus a climate and landscape that lends itself to supporting a better quality animal. We have a niche group of buyers that expect premiums on their fat cattle and they like to buy them from this part of the world," he said.