Currently, this market—both on the cattle and commodity sides—is in a bit of a holding pattern, maintaining steady from day to day, but I don’t think it’s going to hold like this for long. I think we’ll see another move in feeder cattle but the biggest jump we’ll see is in the bred female market.
Video sale season is wrapping up, so a lot of the nation’s cattle forward contracting is nearing completion. Now we are waiting for a couple of things: calves to grow into their projected weights and ranchers to get their checks! It is the same with our commodity growers. Harvest that hasn’t already been done isn’t very far away, and now growers are just waiting for moisture content, heads to form, and weather to cooperate. This holding pattern gives the feeling that it is the calm before another storm.
As I’ve traveled big portions of the West over the last month, the countryside still look fantastic. Some mountain peaks have held snow! We aren’t very far away from fall gathers, and it could be tougher to get these cattle home because they won’t feel the pressure as much! Much of the feed is still green and summer has been relatively cooler than normal in most of these regions, allowing for grass to thrive much later than normal. Albeit grass was later to start this year, it sure has made up for it. Luckily, this has held fire season at bay and cattlemen have had a good summer. Hay growers have taken the biggest hit this year, with hay dropping by over 50% in some areas. Cow hay is plentiful this year because most growers haven’t been able to have weather cooperate long enough to keep moisture off windrows.
For calves that are scheduled for October, preconditioning is happening right now. It’s the preparation to fulfill the contract and move their business forward into the next year. It won’t be long before this calf crop starts loading up to head to their next phase. I find myself more and more anxious each day for all aspects of this market to break loose. I don’t think any ag publication could talk about this current market situation any more, but the pull-through demand for replacement females hasn’t taken full effect yet. I truly think in another 60 days these females will take a sharp and upward jolt in value. I’m more surprised it hasn’t already happened.
Currently, bred cows are relatively more affordable than most would think, especially when the calf they are weaning is bringing north of $1,500/head. In fact, bred cattle featured on the recent Northern Livestock Video Auction and Superior Livestock video sales were considered a good value compared to the calves they had just weaned off. If everything holds to today’s numbers, the breakeven on these females is less than 18 months. I fully feel this market is going to hold for some time to give ranchers the opportunity to sell a higher-valued calf out of these cows. These females will be much cheaper to feed through winter this year and they’ll have a high-valued calf inside them.
This week was the first time I felt buyers were speculating on heifer calves for breeding speculation. When you look at statistics across the nation, heifer retention hasn’t yet happened and the cattle herd has continued to shrink. Last week, WLJ reported on national beef exports showing a decrease north of 10%. We simply don’t have the inventory to support growth in all areas right now.
With all the mid- and small-level packing plants that have been recently built or in construction right now, this should continue to add competition in generating market space for their product. This is creating a second level of demand for feeder cattle and will continue to increase competition across much of the nation for cattle. This will be great timing for ranchers to continue this level of trade for the near future. We all remember how fast things changed in the 2014-15 market, but I just don’t see anything to support that drastic of a correction anytime soon. We should be able to sustain this for another calf crop at the least. It would simply take something beyond comprehension to stop this market.
When you look at all the factors keeping these calves at a higher value, the next few months could see a big swing in all values of cattle. It will be an exciting fall season to keep a very close eye on. — LOGAN IPSEN
