Price declines predicted for calf market through 2019

Whitman, Neb. – Increasing beef exports in 2017 weren’t enough to increase calf prices, according to the senior economist for the Livestock Marketing Information Center.

Jim Robb told producers at the annual open house at the Gudmundsen Sandhills Laboratory in Whitman, Neb. that, although the fed cattle market has really stabilized the calf and yearling markets this year, he doesn’t see calf prices increasing significantly above a year ago.

“The fed cattle market has tapered off in recent weeks, but it doesn’t feel like a year ago, or the year before that, in terms of the fourth quarter being as rocky and spilling back across the calf and yearling market,” he said.

Calf prices

Calf prices for 500- to 600-pound steers in the Southern Plains market are nearly the same as last year.

“I’m not sure the fed cattle market will break hard in October,” Robb explained. “We had a unique set of circumstances last year that I’m not sure will repeat themselves this year.”

“Calf prices this fall may be above where they were last fall, but that could be a little bit of a false signal, so I would be cautious,” he warned producers.

Yearling dynamics

The dynamic has been in yearling 700- to 800-pound steers versus fed cattle.

“A couple years ago, the differential was $80 this time of year. An $80 premium for 700- to 800-pound steers isn’t going to work, no matter what corn prices are,” Robb emphasized. “We’re in more of a normal range this year.”

“We do have 700- to 800-pound steers that are a little high compared to fed cattle. These prices will have to come down some compared to last year. Just a word of caution, we’re still sitting on some of those long yearlings,” he said.

Cull cows

The cull cow market is still strong, mostly because of the lack of beef imported into the U.S. from Australia.

Robb said, typically, producers will see a seasonal decline in cull cow prices, but despite the drought in the northern states, the market is steady.

“If producers have access to good forage, they may want to hold onto some of those cows a little longer,” he said.

Potential scenarios

Robb also explained a scenario where the market is actually pulling cattle ahead and harvesting them at smaller dressed weights.

“This hasn’t happened since 2003, and it was because of bovine spongiform encephalopathy (BSE),” he explained. “We’ve never pulled cattle ahead because of the market, unless the winter weather was so severe we were essentially freezing cattle to the ground in the feedlots.”

“So, when the market does this, it sets a different tone than when the market can’t pull cattle through the system. This is a better market environment than a year ago,” he stated.

A look forward

Beef production is expected to increase through 2018, Robb said.

“Taking into account production ramping up, overlaying that with per capita meat consumption, imports and taking out exports, our per capita beef supply in 2018 is expected to be the largest since 2012, which will give us prices similar to what they were in 2011-12,” he said.

“The long-term outlook on a year-to-year basis is that calves and yearlings will be going down in price, with fed cattle slightly up this year,” he said. “The key will be the fourth quarter. Don’t get sucked into a false rebound that has come from the good things that have happened this year.”

Robb sees prices remaining flat, at least into 2019 – and maybe into 2020. He predicts Southern Plains prices of $1.41 to $1.50 for 500- to 600-pound steers in 2018 and $1.38 to $1.52 in 2019.

“Realistically, I see the potential for a higher calf market by the fourth quarter of 2019, but it may not be until 2020,” Robb emphasized. “The point is, the rocky road is not behind us yet. Right now, the prices are similar to the 2011-12 range from a cattle supply perspective.”

Despite that, Robb sees cow/calf producers making money this year.

“The returns over cash costs and pasture rent are expected to be up this year,” he said.

However, because of the uncertainties in the market, he urged producers to be cautious and be decisive in making management decisions.

“It is always more critical to make sound decisions, especially when we are swimming upstream in a declining market,” he said.

Gayle Smith is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net