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In the Cattle Markets: Northern Plains Feeder Calf Situation

03 October 2012
LMIC

US - Tim Petry, Livestock Economist for North Dakota State University looks at the Northern Plains feed calf situation, and warns that supplies in 2013 may remain tight.

I am spending this week in Western North Dakota providing price situation and outlook information to cow-calf producers. Although it is very dry, unlike some other drought years very few calves have been sold yet. Many cows and calves are now grazing crop aftermath from what turned out to be a good small grain crop given the limited amount of moisture that was received. Summer grazed feeder cattle were marketed in September as usual. Normally, the fall calf marketing season here begins in mid-October and that will be the case again.

Last spring most producers had higher price expectations than current levels, but also realize that it could be worse. Even after the Lean Fine Textured Beef media fiasco, a case of BSE, and the worst drought in the Corn Belt since 1988 and higher than expected corn prices; calf prices are still record high for this time of the year. Compare that to feeder pig and feeder lamb prices that are not only below last year, but also below the past 5-year average for this time of the year.

Producers also remember last year when calf prices increased contra seasonally from the second week in October through the end of the year. They are wondering if that could happen again. Recall that last year December corn futures fell about $2 per bushel from early September into October, and in December were at the lowest levels since the spring of 2011. And December live cattle futures rallied $8 per hundredweight from the end of September until the end of December.

This year, December corn futures did decline about $1 in September which was supportive to calf prices. But the USDA-NASS Grain Stocks report released on September 28 reported corn stocks in the US on September 1, 2012, at 988 million bushels. That number was down 12% from last year and lower than the trade estimate of about 1.126 billion bushels. December corn futures rallied 40 cents on Friday after the report.

And December live cattle futures prices declined about $6 in September of this year as the cash market did not respond to futures market expectations.

Even though a contra seasonal increase in calf prices of the magnitude of last year is not likely, the calf market should receive support from several factors. Feeder cattle supplies outside feedlots on July 1 were down about 3.2% from last year. And calves have been marketed early from areas hard hit by drought conditions. Last week’s rain in parts of the Southern Plains has improved, at least temporarily, the prospects for winter wheat grazing. Also, a higher than normal amount of drought damaged corn was chopped for silage in the Western Corn Belt, but the exact amount is still unknown. Some silage will be fed to dairy cows and to help maintain beef cow herds. But some will still be available to feed calves.

Even though calf prices are lower now than earlier expected, the potential for higher calf prices next year exists. A smaller calf crop in 2013 is likely and will be supportive to prices. However, Mother Nature will need to cooperate with much needed precipitation across the US Spring seasonal highs in calf prices are dependent on spring grazing conditions. And a good corn crop will be necessary to keep corn prices from increasing.



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