It’s Really Spring
Published: 19 April 2014
As you read this edition of the Roundup, it is legally spring according to the calendar. As I write this column, I see nothing but snow, so we’re calling it a spring storm and looking at the 90-day precipitation outlook. Most of Wyoming is in the above normal area for predicted precipiation. Mud is the name of the game here lately.
Earlier this week, a number of articles pertaining to cattle price trends and outlooks came out, and as expected, they have good news. Cattle prices keep going up, and we hope lamb prices will do the same.
One hesitates to talk about strong cattle prices and all the precipitation in fear of jinxing it, but we will give it a try. First, the negative news is that cattle feeding operations are still shrinking. We just don’t have the number of cattle to sustain the number of feedlots there are, so the number has to shrink. Those feedlots with 1,000 head or less one-time capacity are the ones disappearing.
As CattleFax tells it, “The net result of the smaller feedyards shutting down is the continued trend of cattle feeding consolidation. The amount of capital required to operate has increased substantially in recent years – with record high cattle prices, the value of a fed steer has increased 70 to 90 percent in just the last five years and has more than doubled since 2002.”
That tells the whole story of the beef business.
This is the time of the year when we see sprigs of green grass, we start wondering what the price of calves will be later on in the summer. Well, save every calf you can. There is no doubt prices will be good.
Something interesting I read this week in CattleFax Trends dealt with shifting margins and the many segments of the industry.
“Margins shifts frequently occur within the various segments of beef production. Inevitably one segment will gain leverage on another segment due to changes in supply and demand fundamentals,” they wrote. “The segments can be broken down into five different categories: cow/calf, stocker, feedlot, packer and retailer. There are only so many dollars that can be made on each animal, and every segment of production is attempting to maximize their share.”
They continue, “When U.S. cattle numbers reach historically low levels and global beef demand continues to grow, the cow/calf operator gains leverage over the segments down the supply chain. When one segment gains leverage, it is always at the expense of another segment.”
As calves get higher, it may be harder for stockers, both summer and winter, to get the profit they want.
A part of the cow/calf segment that we’ve talked about before is the cull cow market. Just think – cull cows now are bringing what fed steers brought not too long ago. The outlook for cull cow prices looks really good, especially if the hills get some green grass and cattle herd expansion takes off. The seasonal pattern for cull cow prices may tighten up if supplies stay tight, as supply and demand rules the roost there, along with high export numbers. We just hope the ruckus with Russia doesn’t get too bad.
If the wind doesn’t dry us out, prices and markets look good. Just keep pulling on those overshoes every morning.