KNOXVILLE, Tenn. — Several factors could be contributing to the recent drop in feeder cattle prices, including weaker futures prices, seasonal trends or a combination of both, according to Andrew Griffith, University of Tennessee agricultural economist.

 

“The key reason for the softer (futures) prices this week (April 12), compared to last week is most likely because feeder cattle futures prices declined,” he said.

 

“However, producers looking to market lightweight calves this spring may  want to heed this small price decline as a warning shot and consider moving calves in the near term.

 

“It is almost certain lightweight calf prices will begin their seasonal decline in April or May and continue to decline through the summer and fall months. Thus, it is important for producers to be decisive regarding their marketing plan because time is running short on taking advantage of seasonally strong lightweight calf prices.”

 

Griffith said meatpackers who are short-bought will have to secure inventory some way, but low box prices earlier in the month keep them hesitant.

 

“Finished cattle prices will finally lose some ground as the market moves to larger finished supplies,” he said, “but cattle feeders appear to be in a position to continue taking advantage of strong prices and positive feeding margins in the near term.”

 

He said producers considering preconditioning and backgrounding fall-born calves may want to stick with the plan.

 

“Weaning fall-born calves in May and backgrounding calves through late July or August is shaping up to be a favorable alternative, as the value of gain appears to be in the 80-cent to $1 range. “There are no guarantees of a profit from preconditioning and backgrounding , but the only major risk faced withhome-raised cattle is a price decline,” he added. “The risk of death loss is generally small, as are most of the other production risks associated with growing calves.”

 

Griffith said producers are already busy spraying pastures and hay season is just around the corner – which means now is the time to finalize spring and summer marketing plans for last year’s fall calf crop.

 

“Similarly, producers with spring calving herds should be thinking about their current calf crop marketing plan, as well as the calf crop that will be starting with the turnout of bulls in the next several weeks,” he said. “Calf marketing needs to be considered before cows are bred because the sire will be 50 percent of the genetic makeup of the calf crop.” Dave Miller, Iowa Farm Bureau Federation director of research and commodityservices, said the spring rise in feeder cattle prices has been a welcome relief for cow-calf producers.

 

“It comes on the back of significant declines in feeder prices for much of 2016,” he said. “Fed cattle prices have also shown some strength lately and that has also helped push feeder cattle prices higher. But the deferred fed cattle futures are not showing nearly as much strength as the nearby months, and that could lead to a shift in the trend for feeder cattle prices as summer approaches.”

 

Likewise, Miller said softening corn prices throughout the past three months has also helped boost feeder cattle prices. “And with planting time approaching, it is likely that some additional volatility could be seen in corn prices, especially if the wet weather persists and plantings are delayed – or if the weather turns a bit hot and dry as summer approaches.”

 

He said the one upside potential that could allow feeder prices to remain strong is China’s change in policy regarding U.S. beef imports.

 

“China recently opened up its market to U.S. beef imports and while it is too early to tell how much that could benefit the U.S. market, there certainly is potential for increased movement of beef to China now that that barrier has been removed,” he said.

 

Moreover, Miller said China buys significant quantities of beef from Australia and India, and the potential for more strength in second half of 2017 fed cattle markets could develop. “If it does, then the expected downturn in feeder cattle prices as summer approaches could be muted.”