Cattle auction prices are no different from ones for sheep, goats, or hogs and show a systematic and random fluctuation over time. These changes are due to trends, cycles, and seasons.
This article will cover prime seasonality, market trends, impacts from feedlots and nature variations, plus challenges in predicting cost variations. Let’s begin.
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With a bit of research into market reports, a stockman can take advantage of these price patterns to anticipate future price changes in livestock sales and plan accordingly.
Price seasonality, for example, comes about due to seasonal variations in supply and demand. Beef cattle production has biological delays between initial production decisions and final output, for example, gestation periods. These lags cause seasonal supply variation.
In the U.S., most calves are born in the spring and weaned in the fall; consequently, there are many available calves from September to November.
As consumers change eating habits throughout the year, demand varies accordingly. For example, peak demand for beef occurs in the “grilling season” between Memorial Day and Labor Day. Indeed, the general outlook is weaker post-Labor Day. This pattern of supply and demand each year in a consistent fashion is the primary catalyst behind cattle price seasonality.
Most seasonal livestock exchange price indices are calculated monthly. Each value in the index compares average prices for a specific month to the average over the year.
The index value for any month is the percentage variation in that month’s average price from the annual average price. An index value of 110 in September means that costs average 10 percent higher than the yearly average. Following this formula, an index value of 90 in December means a 10 percent lower value than the annual average.
Steers or bullocks are young castrated cattle used generally for beef production. We see a clear seasonal trend for Arkansas steers between 500 and 600lb.
Livestock auction prices are six percent above the annual average in March and stay that way through May before falling in the summer. Consequently, September has the lowest yearly prices at 94.6 percent of the 12-month average. Prices also decline in the calf market in the fall due to the surplus of calves at this time.
A feeder calf is a steer or heifer weighing between 800 and 1,000lb. They move to a feedyard from yearlings to two years old and are fattened in preparation for slaughter. Heavier feeder cattle have more subtle seasonal variations and may require special sales.
Prices on sale day for a feeder steer closely follow annual average sale barn price levels. However, 700 to 800lb steers are more expensive during March and August feeder cattle markets – about 1.5% above average. Feeder cattle prices are seasonally lowest in December when they are 1.5% below yearly average price levels.
Stockyards have adapted their production calendar to make the most of changes in customer shopping habits, such as an increased desire for spring beef. Harsh winters play havoc with marketing and can raise prices due to reduced weight gain in cattle. These factors lead to March and April seeing the best cattle prices.
Feedlots work specifically to meet these requirements and contract or buy feeder cattle at the end of summer or beginning of fall to guarantee supply meets demand. As an added complication, feedlots have to compete with companies breeding stockers for the purchase of cattle to graze on smaller grain pastures during the winter.
Stockers are calves that have finished weaning and are grazing on pasture before finishing and slaughtering. They are generally younger, lighter, and of poorer quality than feeders. These factors made stocker and feeder cows more attractive to buyers in the summer during the 1970s and 1980s. They would consequently fetch higher prices in the summer compared to the spring.
All these factors lead to higher than average pricing points in summer and winter for feeder cattle weighing 700 to 800lb.
Nature Plays a Huge Role
Nature is the primary influencer in production and supply trends in the livestock industry. As we have seen, most calves are born in late winter and spring. The animals’ nutritional requirements peak after it finishes suckling, and nature provides for this by making vegetation plentiful at this time.
During the hotter months, natural forage availability decreases, reducing the fertility rates of females and males. Consequently, the supply of feeder animals is usually the best during fall and worst during spring. This production and supply cycle usually means livestock prices in the spring are higher than in the fall.
Rates of price change differ from the spring to the fall. As weights of cattle increase, spring prices for steer calves decrease much more quickly than in the fall. These results suggest that discounts for added weight are more in the spring than in the fall.
Discounts for Seasonal Weight Differences
This seasonal difference in weight discounts might be due to several reasons. More significant weight discounts in the spring might result from high demand for lighter-weight cattle more suitable for grazing on spring pastures. However, feedlot cattle are in higher demand in the fall, so the auction market prefers somewhat heavier animals.
Furthermore, seasonal feeder cattle supply fluctuations could contribute to the differing weight discounts. Fewer available heavier weight cattle in the fall probably accounts for the smaller fall weight discounts. More significant numbers of heavier-weight cattle in the spring mean more considerable savings.
You can measure seasonal price movements can be measured over several years. Monthly prices can be indexed to show how much they are above or below the annual price average. Seasonal price trends may change permanently or temporarily with changing consumption patterns or increasing or decreasing supply.
These seasonal price index examples were calculated over 10 years back in the 1990s for Amarillo direct-fed steers (1,100 to 1,300lb), Texas feeder steers (700 to 800lb), and Texas feeder steers (500 to 600lb).
Pricing variations over 10 years for Texas direct fed steers in standard years, i.e., a year without drought or substantial grain pricing fluctuations, are reasonably stable. The most expensive fed-steer pricing happens typically in the spring and the cheapest in summer and September.
Most calves finish weaning and go to a cattle sale in the fall, so this trend makes a lot of sense.
Difficulties of Predicting Cost Variations
The pricing pattern for 700 to 800lb Texas feeder steers is more unpredictable, so it is difficult to predict cost variations.
Seasonal price trends are generally uniform during the 10-year range. The highest prices are in January, with a decline through May. They start increasing in the summer and then drop again in the fall.
This trend makes sense because these cattle are grazing on pasture in January before transferring to cattlemen’s livestock markets in February. The majority then go to market in May.
Feeding operations usually do most of their business in late spring and summer, and there is an increased demand for substitute cattle to restock the feedlots.
Feeder cattle pricing falls when most feedyards reach capacity in the fall. Furthermore, many of the year’s calves are available for sale from September to November.
The pricing trends of 500lb to 600lb Texan feeder cattle were not easy to predict either due to the variations in the figures provided. The most significant variation per month was in April with a US$13.50 per hundredweight pricing spread, while the smallest was in November with a variation of US$10.65 per hundredweight.
However, seasonal trends are relatively uniform throughout a 10-year range. The high pricing was from March through May and the lowest in September through December.
One would expect a trend of this kind since about 75% of calves are born between January and June. Calves weighing 500lb to 600lb are in short supply in these months, although numbers increase after August when weaning and preparation for the livestock markets begin.
Sample Figures for Some U.S. States
Here are some figures for Iowa, Southern Minnesota, and Sioux Falls from 2005 to 2014
Choice Steers in Iowa and Southern Minnesota (1,100 to 1,300lb)
Prices were higher from January to April, then fell during summer before rising again in the fall. They were close to national averages throughout the period, with highs in November and December and lows in June.
Yearling Steers in Iowa (700 to 800Ib)
On average, yearling steers showed plenty of variation. Prices rose steadily from January to June, then remained similar from July to December with a high point in September. Prices were highest in mid-fall and lowest at the beginning of the year. Prices were near the annual average throughout the entire year.
Steer Calves in Iowa (500 to 600Ib)
There are relatively few differences in the average price index throughout the year. Prices for steer calves were lowest in January and highest in November and December.
Cull Cows in Sioux Falls
Average cull cow prices vary significantly. There was an upward pattern from January to May, stability from May to August, but a fall from September to December. Cull cow prices were lowest in November, December, and January and highest in the summer.
Prices were above the annual average from March through September but below the yearly average in January and February and then October through December.
The U.S. Department of Agriculture (USDA) is a valuable source of daily summary reports and weekly auction summaries.