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Cattle markets in 2022

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The start of a new year is a good time to consider risk management opportunities that might be useful at some point during the year.

Cattle markets finished 2021 on a much stronger note than in the past few years. Optimism for higher prices in 2022 has been building for months and market activity over the past few weeks has only added to that optimism.

Using a simple average of the weekly 5-area averages, fed cattle prices averaged about $138 per cwt in December 2021 (the full monthly weighted average report hasn’t been released yet and could be a little different). This is sharply higher than the monthly weighted average for December 2020 which was about $108 per cwt. For reference, there has been only one month (May 2017) that topped $138 since mid-2015.

Cattle futures contract prices for 2022 traded on CME reflect the optimism for higher prices. Live cattle futures quotes are around $144 per cwt for April and $138 for the June and August contracts. Feeder cattle futures prices are also much stronger with spring contracts in the mid $170 range and summer contracts topping $180 per cwt.

The start of a new year is a good time to consider risk management opportunities that might be useful at some point during the year. Even with the optimistic outlook for 2022, there are (of course) risks and headwinds that could impact markets.

Current price expectations may offer pricing opportunities for producers looking to manage price risk. Whether that be through using futures, options, or USDA’s Livestock Risk Protection (LRP), there are tools available to offload some price risk. Just like with all risk management decisions, the time to think about it is before you might need it. Kenny provided a more in-depth discussion of these tools in this newsletter from last year (Click Here to Read).

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