How Low is Low?
Well, in the last couple of weeks, we dug out our overshoes, muck boots and slickers and, as they say, held a rain dance, weather permitting. The last four or so years, this type of spring weather seems to be the normal for some of us. We’re not complaining, but we are learning to be behind in our spring work for most of the summer again. A lot of us, especially those in Fremont County, are going to be busy putting fencing back in across creeks and rivers. But thank God for the moisture, and if this is climate change, I’ll take it over a drought any time.
By the way, the current DroughtScape map of Wyoming looks really good now, and it is supposed to be cooler and wetter over the next two to three weeks.
A lot of talk around the mud holes these days is over what the price of calves is going to be this summer. Are they going lower, stay steady or will they either go up or down during the summer and fall? The big question is, what are the market lows?
Knowing that I am the last person to know the answer to those questions, I did come across an article by Victoria G. Myers of the Progressive Farmer on just those issues. I thought it may be of interest to you.
The article had some quotes from Chris Hurt, an agricultural economist from Purdue, who said that the beef industry has a history of knowing what the right price range is for cattle. He likens it to the price of a gallon of gasoline and what we think of as a low price or a high price based on our history of pulling up to the pump. In today’s market, extreme price volatility makes it hard to know what is too high or too low. Hurt said with the beef market, it’s the same thing. No one knows what the “right price” is. The historical markers we had are gone. When you are trading at $70 to $100 a hundredweight (cwt.), as we primarily did from 2003 through 2011, it’s easy to say, “This is the high, and this is the low.” We are in the process now of reestablishing our new normal.
He went on to say that cattle producers got caught up in the excitement of Choice steer prices averaging $161 per cwt. over the last half of 2014 and the first half of 2015. But after May 2015, those prices fell sharply, averaging $136 per cwt. over the last quarter of the year.
Hurt anticipates 2016 finished cattle prices will see a yearly average of around $130 per cwt., and this accounts for a downward trend after the second quarter of this year.
In my thinking, the feeders have got a lot tougher after losing big lately. The figures show most feeders lost $300 a head in March feeding a calf to the fat market, and that is a smaller loss than months before. Feeders just can’t afford to lose any longer.
The expansion phase, as welcome as it has been, is unlikely to resemble those of the past, Hurt believes. While some analysts are predicting the growth cycle will last into 2020, he expected there is about one year left in the trend. This follows an unusually aggressive expansion in 2014 and 2015.
So, hang on. It could get rough, maybe. More next week.