Volatility abounds in fed and feeder steer prices

Recent market volatility makes the decision to buy or sell cattle a real gut-wrencher.

Nevil Speer

January 21, 2016

2 Min Read
Volatility abounds in fed and feeder steer prices

Volatility has been the enduring theme the past several months. The beef complex has been caught up in a web of big weekly moves of late – mostly in the negative direction. Regardless of the direction, though, volatility can make decision-making very difficult. 

This week’s illustration highlights the magnitude of current volatility in both the fed and feeder market. The graph represents the 13-week moving average of weekly price changes. For many years, weekly market moves largely hovered around $20 per head and $10 per head for the fed and feeder market, respectively. 

That all began to change in early-2014, although, in 2014 most of the change was in the positive direction. However, at the close of 2015, weekly moves amplified to average nearly $60 per head on the fed side and $40 per head for feeder cattle.   

weekly fed cattle swings

Putting that in context, consider a feedyard with capacity of 25,000-30,000 head; weekly turnover would equate to approximately 1,000 head per week. As such, a decision to buy, or not to buy, feeder cattle on any given week could represent a $40,000 swing. And, of course, that gets even bigger on the fed side. 

Meanwhile, just selling a load of feeder cattle one week versus another could represent a difference of $3,000. As such, decision-making around the market carries ever more weight than ever before.  

How do you perceive the current trend? Is this the new normal or simply a blip that will settle down in the year(s) to come? How are you adjusting your marketing decisions around the volatility of 2015? 

Leave your thoughts in the comments section below.  

Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.


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About the Author(s)

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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