– Dr. Kenny Burdine and Dr. Greg Halich, University of Kentucky
The new year has brought a bit more optimism to feeder cattle markets. Nearby CME© Feeder Cattle futures traded below $150 per cwt early-mid December before seeming to find what looks like a “bottom”. Since, they have pushed well into the $160’s at the time of this writing (January 6, 2015). As often happens, feeder cattle markets seemed to have followed fed cattle markets upward as fed cattle prices pushed back into the $130’s per cwt for the last week of 2015 (see graph below). While this is well below where we were six months ago, things are certainly more encouraging now than they were as I wrote last month’s update.
It is probably a bit early to be thinking about implications for spring, but the current level of fall 2016 CME© Feeder Cattle futures would likely support a 550# steer calf price in Kentucky in the $170-$180 per cwt range by April. Of course, if this were to be the state average, larger groups of high quality calves would likely approach $200 per cwt. No doubt, this market will continue to evolve over the coming months, but it certainly points to a considerable improvement in the calf market from our fall 2015 lows if the recent rally is sustained.
As we start thinking broader about 2016, it is very likely that this will be the year that we see beef production truly increase. There are a lot of heavy cattle currently on feed that will work their way through the beef system early in 2016. Later in the year, the larger 2015 calf crop will start to reach harvest. Production increases are also expected for pork and poultry, which will continue to present more competition in the meat case. With production increases likely, the export trade picture will once again have a significant impact on prices as it will determine how much change is seen in domestic protein availability.
Data Source: USDA-ERS and USDA-FAS
Livestock Marketing Information Center