How does the old joke go? If you walk into the sale barn cafe, there’s a good chance you’ll be able to hear a someone griping about the cattle markets or the weather. Two subjects that are ever-changing, and neither will be just right. Too much moisture, or temperature swings to wide. If we sell our cattle on a high market, we’ll complain if they didn’t top the market. It never fails. Growing up in a family that purchased and fed thousands of cattle a year, and now owning a local cattle auction, these subjects are all too familiar.
What affects cattle market value? Now that we’ve seen a streak of record-breaking prices at the end of 2014, which the markets seemed to have somewhat softened heading into 2015, what will the outlooks be for the near future and long-term? Will they stay high? Will we ever see a return to seasonality of the markets? Surely, this cycle of high prices has to come back around, right? These are the questions that keep the market analysts in business and they’ve got it pretty good, because they’ll never really know until it happens.
The cattle markets used to experience a dependable seasonal fluctuation in prices. In my stocker/feeder cattle college courses, we discussed this fluctuation, but recognized it was headed out the door, even in 2008. This seasonality of cattle prices refers to the general trend for changes in price during the year reflective of supply and demand. You could estimate where the annual prices would hit highs and lows based on the season averages and trends from previous years.
The cattle business operates on a fairly stable cycle between the climatic seasons. In the U.S., weather dictates when cattle are calved (spring) and weaned (fall) and when the markets will be flooded with a supply of calves and cull cows. Crop harvest in the fall also dictates when there will be an abundant supply of feedstuffs available. This still rings true, however, suppliers have played this well and developed storage ability to carry-over crops and cattle to suit these fluctuations.
Generally, cattle producers could play this market, holding weaned calves as “stockers” and marketing them when the season price trend would be back on its way up. When the flood of fall weaned calves hit the market, prices usually fell. So you could hold your calves until after the first of the year, when feedlots inventories would start dropping again, and market your calves when the seasonal prices would go back up.
Here’s a visual of what that seasonal market trend looked like in the 1990s for Virginia cattle markets, for 500-weight calves.
Today, due to a large number of factors, including extended periods of drought in the heart of cattle country, decreasing U.S. cattle herd size (supply), the ability of producers to contract prices, selling calves via video sells with an agreement for a later delivery date, and increased foreign export markets and demand, this seasonality of the markets can almost be thrown out the window. The cattle markets have been trending up fairly steady since 2009, continuing to set all time records for price and throwing a huge wrench in being able to predict the seasonality of these prices.
To an extent, there are still a few trends to be identified, but as the markets this past fall showed us, it’s incredibly difficult to predict where the prices will go. I’m not an expert of the markets by any means, but it is an interesting thing to watch and observe.
Obviously it’s much more complicated than what I’ve described above, but after having a few questions sent my way, I figured I could share this bit of experience. If you really want to learn more about the cattle markets and how they’re affected by trends and price fluctuations, here are a few resources from folks who have built a career studying them.
- Oklahoma State University Livestock Economist, Darrell Peel – a well-respected analyst of the cattle markets and one of the great professors I had the opportunity to learn from during my college years.
- CattleFax – probably the most recognized firm in the cattle business for analyzing and predicting the market structure. Most of their services require paid subscriptions, but they’ll often provide reports and webinars for industry outlets.
- CME Group – a large trading firm, whose website has several great resources to watch the commodity markets and provides several great reports on market activity.
- USDA Agricultural Marketing Service (AMS) – An arm of the USDA that records and tracks agricultural market data. They’ll provide regular reports on commodities and record local auction market prices as well. Tons of resources available if you spend some time on their website.
A few of my favorite mobile apps for watching the cattle markets
- Cattle Market Mobile – This mobile app has taken the above mentioned USDA reports and made them available on our mobile devices. Very handy tools that break down these reports and includes a good feature that allows you to estimate the value of cattle, using weight, frame and gender characteristics, based on current market reports. Available free on Android (link) and iOS (link) devices.
- Food Animal Report by Feedstuffs – This mobile app is a great news source from one of the leading media groups in the livestock industry. Is very valuable to have these news stories and industry information in your hand. Available free on Android (link) and iOS (link) devices.