Call the Market

Gamble of Feeder Cattle Prices Continues

ShayLe Stewart
By  ShayLe Stewart , DTN Livestock Analyst
Even if you are marketing your calves as a commodity, differentiating them from the rest of the market can pay dividends. (DTN photo by ShayLe Stewart)

While "normal" Americans settle into their summer schedules as soon as school is out for the kids, for a lot of cattlemen, summer doesn't feel like it has officially begun until the first big feeder cattle sale of the year. Last week, at Superior's Corn Belt Classic sale, the market saw its first big test of the 2021 feeder cattle market, and there were plenty of anxious emotions surrounding the sale. Following the less-than-ideal 2020 prices, cattlemen were leery of what the market would unveil this year given harsh drought conditions, limited water and the massive herd culling that's been taking place across much of the western United States.

In looking at the graph that accompanies this column, you'll see in every weight group (other than steers 600 to 635 pounds), not only did 2021's prices surpass those of 2020, but they also blew by the market's reigning three-year average for steers in region two (Montana, Wyoming, North Dakota, South Dakota, Nebraska, Colorado and Utah) of Superior's Corn Belt Classic sale. Truthfully, given the market's sorry fat cattle prices throughout 2021, the recent peak in boxed beef prices and lackadaisical processing speeds, no one expected the sale to fare this well.

Just because prices were stronger at the Corn Belt Classic this year than years past doesn't mean the market is free and clear of any hurdles. It seems rather odd, in a year where drought conditions are a daily topic amongst most operations, there weren't more cattle consigned to Superior's first sale. Looking back over the last five years, the Corn Belt Classic saw 69,850 head consigned in 2017, 66,450 head in 2018, 44,900 head in 2019, 43,760 head in 2020 and just 50,388 head in 2021. This trend is also seen in Northern Livestock Video Auction's sales, as in 2020, their Early Summer Special sale had 16,600 head consigned and this year the sale only has 10,300 head to sell.

Historically, the first big video auctions of the year have served as a test, as many producers like seeing what the market has to offer before they list their calves. But given 2021's harsh conditions, I was surprised we didn't see more cattle consigned to these initial sales. Is it a matter of wanting to see what the market has to offer? Or is it something bigger than that?

Looking at some of challenges the market could potentially pose, cattlemen need to stay alert and engaged. With hay prices dancing north of $200 per ton in much of the western U.S. and corn prices still tough to pinpoint for feedlots, the gamble of feeder cattle prices continues.

DTN Lead Market Analyst Todd Hultman recently had this to say about the corn market: "Of course, weather will be a big factor for the price of corn again in 2021-22; so far, the central and Eastern Corn Belt have chances for successful harvests, while the northwestern Corn Belt is apt to see a drop in production. With old-crop corn supplies estimated at their lowest level in eight years and China on track for needing roughly a billion bushels again in the new season, there is a good chance corn prices will trade in the $5 to $6 range in the new 2021-22 season."

When markets are uncertain, it never hurts to investigate other marketing options. It was undeniable at the Corn Belt Classic that programmed cattle (NHTC, verified natural, GAP 4) all brought a premium. Even if you are marketing your calves as a commodity, differentiating them from the rest of the market can pay dividends. Calling your local country buyer, your local sale barn representative or potentially the feedlot you sold directly to last year and asking them what they desire most can give you the upper hand in marketing your calves.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

ShayLe Stewart