Brockelmann expects seasonal cattle prices for 2019 market year

Coming off of July price lows for fed cattle, CattleFax Analyst Troy Brockelmann said a 17 percent increase was seen in the market to the end of the year. However, supply and weather conditions are beginning to affect the market adversely. 

2019 is also the wettest year on record, going back to 1984, said Brockelman. 

 “Cold, wet weather results in wet, muddy, greasy pen conditions, and cattle suffer because of that,” he commented. 

“Muddy pen conditions influence us to push cattle back, decrease the front-end supply and support the cash market into the spring,” he said, noting an approximately 1.5 percent boost in cattle on feed. “We have adequate supplies out there, which is starting to pressure feeder prices. We also see a lot of our feedyards at capacity, and there isn’t the room available to place some of these cattle.”

Feeder prices

Cattle on feed numbers are the largest seen since 2012 for feedyards of 1,000-plus head capacity. When including all feedyards across the nation, cattle on feed is the largest since 2008.

“We have plenty of supply and more coming as we go down the line,” he said. “Total feeder cattle and calf supply is about 700,000 head for 2019.”

Losses of about $55 per head were estimated in 2018 for feeders, and weakness in steer prices continue in the early part of the year, Brockelman said, forecasting a three-dollar-per-head decrease this year again.

Cow/calf

For cow/calf producers and backgrounders, the simple average of fed cattle profit and loss, assuming no risk management, wide swings have been seen in cattle feeder profitability. Losses last year resulted in weakness for the 750-pound steer prices. 

“On average, we expect prices to be down about three dollars from a year ago,” Brockelmann added, noting a range of $1.30 to $1.60. “The index of the last 20 seasonal fed market years would expect prices to trend a little higher in January, find a low in February and move into a fall high.” 

Trends

A similar trend was seen last year but as a result of drought rather than winter weather.  

  “The market should take the personality of a year ago,” Brockelmann said. “As we work through wet weather and loosen up front end supply and think about going forward, February should get better every day.”  

He noted, “There’s a battle between large supplies and weakening demand.” 

As a result, Brockelmann expects cattle markets to echo year-ago numbers, with a top-side around the higher $1.40s until summer. 

2019’s 550-pound steer prices started below 2018 levels, due to heavy supply. Moving forward, Brockelmann expects prices to move higher, particular as pasture quality looks good for the beginning of the year. 

Brockelmann noted that an average increase of 19 percent is seen between fall lows and spring highs, which could mean $1.85 for the high of the spring of 2019. 

“We expect our markets to be pretty seasonal this year,” Brockelmann said. “We might find our high later and move lower as we move into fall.” 

Saige Albert, managing editor of the Wyoming Livestock Roundup, wrote this article from a Jan. 23 CattleFax Trends+ webinar, sponsored by Elanco Animal Health. Send comments on this article to roundup@wylr.net.