“As we (the industry) keep heifers back and we work through the tail end of last year’s drought cattle, we’re just now on the verge of supplies getting tight,” says Jackie Moore, owner of Joplin Regional Stockyards in Carthage, MO.
Think of that. That’s despite beef cows numbers having declined every year, and 9% overall, since 2007 (January to January). And 2007 was a time when beef cow numbers were already sucking dregs by historical standards.
September feeder cattle futures were at $160.52 on June 8; November futures were at $162.50, and the CME Feeder Cattle Index that day was $155.45. A jag of six-weight calves traded through the Superior Video Auction June 6-7 at $174-$178 for October delivery. That was despite the market’s anemic response to a May Cattle on Feed report that caught plenty of folks by surprise with the 15% decline in April feedlot placements year over year.
“While seasonal price patterns would typically be lower during the summer, the highest prices for 2012 are anticipated to occur during the second half of the year,” explained analysts in the May Livestock, Dairy and Poultry Outlook.
“With a market like this, it’s hard for sellers to make a mistake,” Moore says.
Even so, Jerry Bohn, manager of Pratt Cattle Feeders, LLC, in Pratt, KS, sees indications that some producers are locking up prices for calves and feeders earlier than normal. Of course, cattle are also moving earlier this year.
“The only thing that’s really changed in our trade area this year is that the season has moved forward by about 30 days,” Moore says. Calves moved to grass sooner and are coming off sooner, too.
If dry conditions continue developing in wide areas of cow country, even more will be finding new homes. Moore says he’s already seen more cull cows moving through his Joplin yard than he expected.
As for producers standing pat with spring calves until late summer or early fall, Moore says it’s about management rather than the markets.
“Genuine cow-calf producers are a unique set of people,” he says. “They do what they do and manage how they do, no matter what the market is.”
Besides, when many producers have weaned and marketed calves in the fall the past couple of years, they’ve been almost assured of the highest prices they’ve ever received. Moore points out that was the case despite the fact that drought liquidation last year made for lower fall prices in 2011 than later on.
“I think these cow-calf producers are going to have to sell calves for $1,000/head before they get too excited about expansion,” Moore says.
Instead, he sees cow-calf producers in the area retaining about the same number of heifers as they usually do. Of course, he points out that backgrounders are buying and breeding more heifers than typical, rolling the dice on added value.
But, it’s that added value that is taking a back seat in the current market. Consider preconditioned sales. “When you can get $1.75 for a five-weight calf right off the cow, there’s not much incentive to wean and precondition it, hoping for $1.85,” Moore says.
Likewise, Bohn points out that retained ownership is the only way to fully exploit the genetic value that cow-calf producers hone. “But, with five-weight cattle pushing $2, it’s hard not to sell,” he adds.
With supplies dwindling even more, Bohn tells cow-calf producers to keep an eye on the weather and corn prices, saying those are really the only two market unknowns heading into fall.
After all, on the other side of the equation, Bohn says, “There’s not going to be a lack of buyers.”
In his own family’s cow-calf and stocker operations, Moore plans to continue following the same rule of thumb he always has. “No matter the market, you have to keep inventory around you,” he says. “You manage risk the best you can and just keep after it.”