Feeder cattle price trends; will this fall’s market toe the line?

Marketing feeder cattle is complex. Here’s a look at historical price ratios.

Nevil Speer

August 16, 2018

1 Min Read
Feeder cattle price trends; will this fall’s market toe the line?

We are about to enter the peak feeder cattle marketing season. The fall run always generates producer attention on the market outlook. As a result, the key question out in the country generally revolves around the general market trend for feeder cattle. 

There are number of factors that drive the feeder market, meaning feeder cattle marketing can prove to be complex. The ongoing trend in the fed-feeder relationship provides, at a minimum, a pricing benchmark to work from. Overwhelmingly, the largest source of variation is derived from deferred live cattle futures contracts. As a result, the best starting point for pricing comes from looking out at the back end of the CME.  

 2018-August-weekly-cme-feeder-cattle-index.png

This week’s graph illustrates the price spread between feeder cattle and the deferred fed market since 2016. The graph reveals an amazingly consistent trend over the past 30 months or so. There’s been some oscillation back and forth, but generally, the CME Feeder Cattle Index has been running about $32 per cwt ahead of the deferred live cattle contract. The average deferred futures price since 2016 equals $112.40; the average feeder cattle index price being $144.18.

That serves as a good baseline. Adjustments for weight, sex, region and management would have to be made respectively from that starting point (more on that in coming weeks).  

Related:July fed cattle market thumbs its nose at conventional wisdom

What’s your general outlook for prices going into this fall? How are you making plans to price and/or market your feeder cattle? Leave your thoughts in the comments section below. 

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY. Contact him at [email protected].

 

About the Author

Nevil Speer

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.

Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
 
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs.  He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
 
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
 
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.

Contact him at [email protected].

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