The beef complex has rallied $30/cwt in the last five weeks, which according to CattleFax is much larger than normal. The market is experiencing the best of the fundamental seasonal factors that normally line up with the spring highs. For the producers who operate feed yards, right now is one of best times they have seen in almost two years.
I spoke with my friend Joel Weber recently. Joel and his family own and operate Weber Feed Yards in Dorchester, Nebraska which is located in the southeastern part of the state.
It, of course, has been a struggle for the past 18 months for feed yard operators. (Not to exclude the cow/calf producers in this time of low prices either.) Today for feeder’s, like Weber Feed Yards, many are experiencing a profit of $100 to $150/head. Optimism, hard work, weather,
Kevin Good with CattleFax explains the current market situation in that, “the cash fed cattle and beef markets rallied, the futures complex continues to trade at a deep discount resulting in record-wide live cattle basis. This combined with the cattle feeder making money, and the opportunity to buy a positive swap on feeders has allowed the industry to pull cattle forward – keeping carcass weights below year-ago levels and improving the feeders bargaining position compared to the packer.”
That is currently good for the feed yards. But, for many cow/calf producers across the nation, the question is: “what will the price of calves be in 2017?” At this point, many buyers won’t stick their necks out too far with a price. The reason, the spring and summer months.
Looking to May and June, CattleFax’s Kevin Good estimates, “with an additional 700,000 head of placements from November to January, the seasonal increase in fed cattle supplies will be larger than normal. Continued currentness will be critical to keeping the front-end supply manageable.”
Traditionally, beef usage will pick up in the spring. CattleFax concludes that prices in the marketplace will be around $120. Now looking to July and August, this is where buyers will “ease up on the clutch” before they start giving a quote on calf prices.
Feeders like Joel Weber know the that “the key to maintaining this rally is that the market must stay current.” Joel and others fear that come summertime if the market does get backed up on cattle, “we could see a disaster in the market.”
Kevin Good is projecting the supply levels in the summer “to be above year-ago levels through summer – testing packing capacity.” Good continues saying “seasonally, beef usage slows through the summer. Larger total protein supplies will be noted. Prices are expected to be on the defensive.”
So, it looks like that at this time, those in the marketplace should enjoy today’s current uptick in the cattle market. And, hold their breath, but not for too long, that the markets may have a chance at staying current. But, now it’s hard to be optimistic when looking at the large estimates of cattle that will most likely back up the packers come summertime. As is it traditionally does.
The industry needs to keep moving forward by continuing to produce the high-quality cattle that we are known for in the region. While also having the hope that tomorrow will be better. I know that optimism is hard to stomach when the bank is calling at dinner time. But, I pray every day that our market situation will turn around.
Stay strong friends.
Lane Nordlund Northern Ag Network and CattleFax