![]() ![]() While both have advantages and disadvantages, they each provide important market information, regardless of if they are used by feeder cattle producers. One of the primary differences between these two forms of contracts is that CME contracts are standardized and video auction contracts can encompass more details about the cattle. The advantage is that the cash price is known before delivery. These are production contracts where the buyer and seller agree on a price for a given set of cattle characteristics to be delivered at a certain month and location. The advantage is that these price signals are available many months in advance of when production is physically sold in the cash market and offer daily price signals. An expected local cash price can be estimated by adding a historically observed basis to the futures price that aligns with the delivery month of interest. These prices, available at the Chicago Mercantile Exchange (CME), represent the global demand for feeder cattle. So where do feeder cattle producers go for price information about delivery of feeder cattle in the future? There are two primary market signals. Price (formed at the intersection of supply and demand) is the signal feeder cattle producers respond to about whether to retain or sell feeder cattle. ![]() Both increasing the supply of feeder cattle from producers and decreasing the demand for feeder cattle from feedlots can result in lower feeder cattle prices. ![]() Worsening drought conditions in the Western United States have caused feeder cattle and cull cows to come to market earlier and higher grain prices due to low stocks-to-use ratios and worsening global corn production have caused a run-up in grain prices lowering a feedlot’s demand for feeder cattle. While there have been positive price movements for feeder cattle, most of the downward price pressure has come over the uncertainty of forage production and higher grain prices. There has been upward price pressure from historically strong retail meat demand and meat exports to China. However, the March feeder futures price was $134.48 recently, and with an expected early March basis of $1.69 per cwt for 750-pound steers in Oklahoma, this suggests a final price of $136.17 per cwt, close to the current cash price of $136.03 per cwt.The feeder cattle market has experienced a significant amount of price variation between March and July. Of course, a 500-pound stocker purchased now will not reach 750 pounds for some time. In November, the higher prices for the lightweight animals resulted in a lower value of gain of $0.74 per pound. In October, the value of gain was slightly higher at $1.05 per pound based on lower prices for both 500 and 750-pound steers. Using a stocker gain of 250 pounds from 500 to 750 pounds, the value of gain in August was $1.02 per pound. The implications of current market conditions depend on the current weight of animals and the amount of additional weight added to animals prior to sale.Ĭhanges in the price-weight line have different impacts on stocker margins as reflected in the value of gain. For producers holding calves after weaning, the low value of gain must be balanced against the value of preconditioning programs and extra weaning time before sale. For example, the most recent prices mean that the value of an additional 50 pounds on a 500-pound steer is about $0.50 per pound. The steep rollback most recently does affect the value of limited weight gain for calves. ![]() The price of 500-pound steers dropped from $165.36 per hundredweight (cwt) in August to $154.06 per cwt in October before bouncing back to $166.97 per cwt in November. The result is a sharper bend in the price-weight line, with an even steeper price rollback for steers up to 600 pounds.įor cow-calf producers selling calves at weaning, price level is the most important determinant of revenue. The result is a price line that becomes bent with sharper declines in prices (a bigger price rollback) for animals under 575 pounds and a very flat price structure with little change in prices for steers from 575 to 875 pounds (red line, Figure 1).Īfter posting lows during the winter storm in late October, steer prices for calves and stockers increased sharply in November, though prices for steers over 600 pounds have changed little as shown in the blue line in Figure 1. As often happens in the fall, prices for steers from 575 to 725 pounds decreased more than lighter and heavier animals. Feeder prices declined seasonally, as expected, into October as shown in the red line in Figure 1. The green line in the chart shows the Oklahoma steer price by weight in August with a typical pattern of prices mostly declining as weight increases. Livestock Grain Market News May 20 feeder cattle summary ![]()
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