Cattle prices will drop as large supplies head to plant

2017-04-12T08:34:00Z Cattle prices will drop as large supplies head to plantBy Jeff DeYoung, Illinois Farmer Today Illinois Farmer Today

Several factors could be contributing to recent softness in the feeder cattle market.

Andrew Griffith, Extension ag economist with the University of Tennessee, says those factors include weaker futures prices, seasonal trends or both.

“The key reason for the softer (futures) prices this week compared to last week is most likely because feeder cattle futures prices declined,” he writes in his weekly market outlook.

“However, producers looking to market lightweight calves this spring may want to heed this small price decline as a warning shot and consider moving calves in the near term. It is almost certain lightweight calf prices will begin their seasonal decline in April or May and continue to decline through the summer and fall months.”

Because of this, Griffith says producers must be decisive when it comes to marketing plans “because time is running short on taking advantage of seasonally strong lightweight calf prices.”

Preconditioning and backgrounding fall-born calves could also be an option for some producers, he says.

“Weaning fall-born calves in May and backgrounding calves through late July or August is shaping up to be a favorable alternative as the value of gain appears to be in the 80 cents to $1 range,” Griffith says.

“There are no guarantees of a profit from preconditioning and backgrounding, but the only major risk faced with home-raised cattle is a price decline.

“Calf marketing needs to be considered before cows are bred, because the sire will be 50 percent of the genetic makeup of the calf.”

Packers and feedlot managers continue their game of tug of war, with prices down substantially over the past two weeks.

“The Fed Cattle Exchange held their weekly auction on Wednesday (April 5) and all lots went unsold,” Griffith says. “The battle continued thru Friday, with packers lowering bids to reflect lower boxed beef prices, while cattle feeders held steady on asking prices due to stronger live cattle futures and tight fed cattle supplies.

“Packers who are short bought will have to secure inventory some way, but low box prices keep them hesitant.”

Griffith says fed cattle prices will likely drop as larger supplies head to the packing plant, but adds strong prices should be plentiful over the near-term.

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