January 31, 2018
One month into 2018 and cattle industry marketing experts are fielding questions about how the cattle market will unfold over the remainder of the year. Coming off an uptick in the feeder calf market at the end of 2017, the coming weeks and months have cattle producers anxious to know if this positive swing will continue.
CattleFax Director of Research and Risk Management Services, Mike Murphy said three factors will define the range for the fed cattle market in 2018. These factors include an increased supply of beef on a per capita basis, a stable retail demand and a slight increase in global demand. During a recent CattleFax Webinar, Murphy emphasized how these factors translate back to value for the U.S. beef producer after coming off three years of a volatile fed cattle market. "We have had exceptional domestic demand since 2013 and, our predictions show demand to remain stable in 2018," said Murphy. "This, along with experiencing the highest export level, in our lifetime, in 2017 at 2.9 billion pounds and 2018 export projections to be even higher, are positives for the industry."
What does this translate into for cattle market prices for 2018? "CattleFax is estimating a low of $98 – $100 per cwt, a top end of $130 and average around $115 per cwt for fed steer price," said Murphy. Taking into consideration 750-pound feeder steer calves started off the first week of the year at $153 per cwt, Murphy calls for "a $130 per cwt low and a high-end for the 750-pound calf market, especially going into the spring, capping off about $155 per cwt." A primary outlier to test this market will be the price of grain, he commented.
Looking at the weaned calf market, Bryan Hanson, co-owner of Fort Pierre Livestock, Ft. Pierre, S.D., emphasized the shift in early sales of 500-weight calves in late summer and fall of 2017. "Due to dry conditions in areas of South Dakota, North Dakota, Wyoming and Montana, producers pulled their feeder cattle ahead and marketed earlier than we traditionally see," said Hanson. "More calves hit sale barns in August than normal as producers chose to save grass and feed to get cows through the winter than keep calves on hand."
"This early selling has changed the landscape going into 2018 as we now see a definite decline in feeder calf numbers regionally, calves that typically would be backgrounded and brought to market in February or March have already sold," said Hanson. "As of late January, the fed cattle market appears to show positive close outs, which is also a good sign for the feeder calf market," said Hanson who also serves as an auctioneer at the Ft. Pierre sale barn.
Seeking an answer to what the upcoming fall calf crop's price will be is always top of mind for producers. "CattleFax is estimating highs of $145 to $150 per cwt in 2018," said Murphy.
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Mark Johnson, Beef Marketing Agent for Producers Livestock Association, Omaha, Neb., agrees with Hanson. "A lot of cattle moved early this year and were placed in yards," said Johnson. Contributing conditions were limited wheat field grazing in the South, drier conditions in the Northern Plains and overall a market creating an incentive to sell rather than hold calves over, commented Johnson.
With a territory stretching statewide, the Centerville, S.D., representative said, "Producers especially East River, ended 2017 with ample feed and a low corn price, encouraging farmer feeders to go back into a more diversified operation, feeding the corn rather than hauling it to town." For 2018, Johnson sees feeder cattle in good demand, with the market staying strong in comparison to the fed cattle market.
"There were some good profits during most of last year, and some producers missed that opportunity because someone else had a sharper pencil." Johnson reminds feeders going into 2018 to know your breakevens, cost of gains, and what to expect for a basis along with the use of the futures or packer agreements to be priced by the second half of the year.
Hanson is cautious to make predictions about the grass cattle market for summer 2018 because things can change based on moisture levels. However, Hanson is more positive about how a regional drought impacts producers' today than in years past. "We are fortunate to have the technology to spread the word quicker to a larger area and number of cattle producers when drought hits a region, forcing a liquidation of cattle out of that region," he said. "Cattle buyers are willing to put wheels under the cattle and haul them 600 to 1,000 miles or more, which has stabilized some of the losses we have seen from droughts in the past."