January 30, 2003

Weather Will Drive Feeder Cattle Prices, Economist Says

Weather will be key factor driving feeder cattle prices into the spring and summer, says a North Dakota State University livestock economist.

"Typical feeder cattle auction market reports in the Northern Plains are often quoting 600 lb. to 800 lb. feeder cattle prices as weak to lower with under 600 lb. calves steady to higher," notes Tim Petry of the NDSU Extension Service. "That situation is not abnormal and typically occurs at this time of the year. But what happens from here depends a great deal on the weather across the country."

Weak prices for heavier feeder cattle and strong markets for their lighter weight counterparts and fed cattle is a dilemma for producers with heavy weight feeder cattle to market, Petry says. That dilemma is compounded by uncertainty over the weather.

In October and November, 2002, lighter weight feeder calves were weak because they were the most plentiful market class., and heavy weight feeders were in short supply. Now, those fall calves have grown and are the most plentiful, so heavier cattle are experiencing price pressure, he says.

Only 15 percent of feeder cattle sold at livestock auctions in North and South Dakota in mid-October weighed over 600 pounds. By mid-January, 77 percent of feeder cattle marketed weighed over 600 pounds. The normal seasonal price pattern for light weight feeder cattle is for prices to be high in March and April and low in October and November, Petry explains. The typical seasonal pattern for heavy weight steers is for the lowest prices to occur in late winter and early spring when supplies on the market are greatest. Higher prices usually happen into summer as supplies decline.

"Relatively large numbers of backgrounded calves are now being marketed in the Northern Plains, because they are ready to be finished in feedlots," Petry says. "In fact, the week of Jan. 6 - 10 saw the largest weekly movement of feeder cattle from North and South Dakota for this marketing year, much higher than the peak week when calves were marketed in the fall."

Favorable winter wheat grazing conditions in Texas, Oklahoma, and south central Kansas resulted in many calves from the drought-stressed, Northern Plains being placed on winter wheat pasture. Wheat pastures have been growing slowly in Oklahoma due to the dry , cold weather since Christmas.

"Warmer weather in late January and February may stimulate growth, but marketings of cattle from winter wheat pastures will likely begin in the next couple of weeks and last through March. Hopefully, a variation in wheat conditions will occur so feeder cattle marketings will be spread out enough to avoid large numbers being sold at the same time," Petry says.

"Another reason for price weakness is that the June and August live cattle futures contracts are trading $8 to $10 lower than the February and April contracts," he notes. "Consequently, feeder cattle being marketed now that are expected to finish in that later time frame are being discounted by feedlot buyers."

Mid-summer is a seasonal low for fed cattle prices because of the large marketings that typically occur at that time. "A key factor affecting improvement of feeder cattle prices into the summer is Corn Belt weather," Petry says. "Parts of the Corn Belt are currently experiencing very dry conditions. If dry weather continues and corn prices increase, feeder cattle prices will be pressured. A return to normal moisture conditions and a good corn crop would be positive for feeder cattle prices."

Light weight feeder cattle typically experience higher prices in the spring due to short supplies and the demand for cattle for summer pasture grazing. Weather will be a critical fundamental factor to watch because much of the Western cattle grazing region is still experiencing severe drought with poor pasture conditions.

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Source: Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu

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