Call the Market

Trying to gauge what feeder cattle are going to bring in the year ahead is always a gut-turning, number-racking, anxious and mindboggling venture that can take a turn for North or South without any considerable notice. For as much as we like to rely on the futures market for forecasting prices, an animal's worth isn't completely known until a hand is shook, the auctioneer cries sold, or a check is signed.

Last week gave us a good understanding of what calves and feeders in 2022 are going to be worth -- or at least a starting point was established for the rest of the year to work with.

Last week, Superior Livestock Auction sold 66,500 head of cattle in their Corn Belt Classic sale in South Sioux City, Nebraska. There were 13,670 head of feeder steers, 9,700 head of feeder heifers, 9,900 head of weaned calves, 18,300 head of unweaned calves, 14,600 head of beef/dairy crosses and 330 head of bred stock sold through the sale. Prices were strong; throughout the U.S., pairs sold for $1,625 to $2,585, cows averaged $1,675 and bred heifers averaged $1,725, but what really grabbed everyone's attention last week were the calf and feeder cattle prices.

Listed below is the comparison of the Corn Belt Classic's sale prices for the three-year span of 2017, 2018, 2019, the 2020 average steer prices, the 2021 average steer prices and obviously the newest and latest prices of the 2022 average steer prices for region 2 and 3.

Click here to access Superior's Market Report to see other regions: https://www.superiorlivestock.com/…

Region 2 (MT, WY, ND, SD, NE, CO, UT)
Steer Weight	Three Yr Avg. ('17, '18, '19)	2020 Average	2021 Average	2022 average
500-540	$ 174.75	$ 149.50	na	na
550-590	$ 165.25	$ 152.50	$ 182.00	$ 211.00
600-635	$ 161.42	$ 144.75	$ 144.75	$ 200.25
650-690	$ 156.92	$ 145.50	$ 164.00	$ 199.50
700-740	$ 153.75	$ 143.25	$ 168.50	$ 208.50
750-790	$ 154.33	$ 138.75	$ 174.25	$ 198.25
Region 3 (AR, NM, TX, OK, AK, LA)
Steer Weight	Three Yr Avg. ('17, '18, '19)	2020 Average	2021 Average	2022 Average
500-540	$ 167.00	$ 170.50	$ 152.00	na
550-595	$ 160.33	$ 155.50	$ 174.00	$ 175.00
600-630	$ 158.50	$ 146.00	$ 157.50	$ 167.75
650-685	$ 157.42	$ 136.50	$ 152.50	$ 165.00
700-735	$ 149.25	$ 139.75	$ 152.50	$ 163.25
750-790	$ 147.54	$ 129.50	$ 149.50	$ 151.75

Throughout the sale, in its varying regions and weight divisions, higher year-over-year prices were seen. The market easily saw $20 to $30 per hundredweight more than the 2021 sale, and in some cases, even more than that.

Dennis Metzger, a Superior representative who's well known throughout the industry, said, "Truthfully, no one knew what to expect. Fundamentally speaking, the industry is sound, but the outside pressures weighing against the market are a sizeable concern. The combination of tight supplies, dwindling carcass weights, packers pulling cattle ahead, a stronger board and the news story of the dead cattle in Kansas all helped push prices higher and make for very happy sellers."

Metzger went on to say, "There's always risk in this business, and from one week to the next, things can change, but our saving grace this year, and most likely into next year, will be that our inventory is so low. In markets like these it pays not to be traditional, and there's more opportunity now than what's been available in a long, long time."

Even though last week's sale was just one test of the market and thousands of cattle are still left to be sold and marketed in 2022, it's indisputable that a higher tone has set the market's precedent. On Thursday, June 22, Northern Livestock Video Auction will host their Early Summer Special where 12,900 head of cattle are scheduled to sell. Given that the feeder cattle market was up $2.00 to $2.50 higher throughout Tuesday's market, thanks to a weaker grain complex, who's to say that prices can't be higher again later this week?

Metzger hit on an important point when he said, "In markets like these, it pays not to be traditional." The market is in a new cycle where our nation's cowherd is dwindling, and we've yet to see drought culling practices subside, as even though some regions have gotten moisture, others haven't. In looking at the history of the 2014 cattle market and its behavior, we have much to correlate to today's market. The ultra-high prices may not come until 2023, but the writing is on the wall for a tremendously strong cattle market.

What can we learn from the 2014 feeder cattle market and apply to this year?

First, I think it's important to understand the timing of rallies and how they play out in the cattle market's cycle. In 2013, the feeder cattle market led the board to start the year on Jan. 1, 2013, at $151.20 and ended the year on Dec. 31, 2013, at $166.70, gaining $15.50 throughout the year. In 2014, the market started on Jan. 2 at $167.00 and ended the year on Dec. 31, 2014, at $219.45, gaining $52.45 throughout the year. In 2015, the year started on Jan. 2, at $223.95 and ended the year on Dec. 31, 2015, at $166.90, equating to a loss of $57.05. This is so important to understand because most cow-calf operations only have one calf crop to market each year, and in a span of 36 months, the market went from relatively strong prices of $166.70 (Dec. 31, 2013) and hit all-time record high prices in 2014, but then was back to $166.90 by the end of 2015. The most important point to realize here is that the cattle market waits for no one. If you see an opportunity coming, you've got to position yourself strategically to make the most of it because it may not come around again for another eight to 10 years.

Second, during these times of market contraction and heightened demand, it's most advantageous to be sitting in a ripe position to sell and to avoid buying emotionally and without calculation. The old market saying of "buy low, sell high" and "you make your money the day you buy, not the day you sell" are pieces of advice to hold close to your chest when the market runs through a year like 2014.

Of course, it was fun to sit in on sales and see females bring upward of $3,000; but by the time 2015 rolled around and that female produced her first calf, the market had seen its high and continued to traipse to lower prices until 2016. Buying on the front end of a rally provides selling power but buying throughout a rally can be costly and dangerous if not carefully calculated.

We can control our timing, knowledge and our liquid assets, but the potentially devastating thing that we cannot control are outside pressures that could leave us needing new marketing decisions. Unfortunately, only time will tell, but in the meantime, don't get caught sleeping behind the wheel and miss out on an opportunity that only comes around once every 10 years.

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

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