An Outlook for Calf Prices Headed into the Fall

It took a few months this winter and into the early spring for calf prices to climb up to 2016 levels, but since May, prices for 2017 have been very consistent with prices in 2016. For reference, I have included a chart for 500- to 600-pound steer calf prices on a weekly basis from the Southern Plains to the right. Other regions all show very similar patterns.

As you can see from the chart, prices in 2016 saw sharp declines from mid-August through the end of October. The question is, will we see a similar pattern in 2017? I don’t think that we will see as sharp of decline, and I think average prices for the third and fourth quarters of 2017 will be higher than 2016. Average prices for 500- to 600-pound steers in the Southern Plains region in the third quarter of 2016 were $157.12 per hundredweight and $138.44 for the fourth quarter of 2016.

As of Aug. 28 of this year, the Livestock Marketing Information Center is projecting that 500- to 600-pound steers in the Southern Plains will average between $161 to $163 in the third quarter and $148 to $153 in quarter four.

According to the latest Cattle on Feed report by USDA’s National Agricultural Statistics Service (NASS), the number of animals on feed in lots with 1,000 or more head capacity remained above a year ago. That would be expected, given the increasing size of U.S. calf crops in recent years.

The on-feed count as of Aug. 1, at 10.6 million head, was 4.3 percent above a year ago, slightly below the year-over-year rise posted as of July 1, which showed an increase of 4.5 percent.

In terms of head, the latest count was 439,000 head above 2016’s and the largest as of Aug. 1 since 2012. However, July placements only increased 2.7 percent compared to a year ago, which was a smaller increase than many analysis expected.

Drought conditions in the northern plains may have led to some early placements into feedlots from Nebraska and South Dakota. Their placements were up 35,000 head and 8,000 head in July over the previous year.

Hurricane Harvey could also have a short-term impact on the market, depending on the number of losses, after it is all said and done. There are 1.2 million beef cows in the 54 counties that were declared a disaster area in Texas. I think I can safely say that almost all of us hope we will not see a significant market impact and that the producers in Texas will come out of this with as few losses as possible.

As a final point in looking over the last two years and thinking about the next few years, it is important for producers to develop some flexibility in their marketing plan. Producers should analyze those value-based marketing windows and determine if they have the resources and cost structure in place to target those marketing windows.

If you have read any of my articles over the last few years, you will know what is coming next. The Wyoming Ranch Tools website at uwyo.edu/ranchtools has a break-even budget calculator designed to help producers make these market timing decisions. It can also help in deciding if investing in a value-added program can make sense on an operation.