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Has The Cyclical High In Cattle Prices Occurred?

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Feb 10, 2005
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Has The Cyclical High In Cattle Prices Occurred? Average reader rating: 0
by Tim Petry, NDSU Extension Service Today 2/24/2005 3:13:00 PM

Has The Cyclical High In Cattle Prices Occurred?

When the cyclical high in cattle prices will occur, or if it already has, is a question on the minds of many producers. Cattle prices are typically at cyclical highs when corresponding cattle inventory numbers are at cyclical low levels. The highest prices for cattle usually occur during the early rebuilding phase of a cattle cycle, when beef production is low due to smaller calf crops, and fewer heifers and cows are sold to rebuild herds.

Cattle numbers are at cyclically low levels, but are increasing, with 2004 being the first year of the cattle cycle rebuilding phase. Total U.S. cattle numbers increased about 960,000 head from Jan. 1, 2004, to Jan. 1, 2005. Beef cow numbers increased by 194,000 head. This was the first increase in cattle numbers since 1996. Eight straight years of liquidation occurred from 1996 through 2003.

Most market analysts are saying that cyclical highs in cattle prices occurred or will occur in 2004 and 2005.

However, some cattle producers would like a more precise answer than highs occurring sometime during a two-year time frame. The proverbial "the devil is in the details" then comes into play because cyclical highs in prices may occur at different times for each market class of cattle.

Furthermore, cattle prices are measured in several different time periods, such as on an annual, seasonal, quarterly, monthly, weekly and daily basis. A daily or weekly high for a particular market class of cattle may occur in one year, but the annual average actually may be higher in another year.

A good example is fed steer prices. They reached an all-time high of more than $110 per hundredweight during the week of Oct. 13 to 17, 2003. However, the 2003 annual average was about $1.25 below the 2004 annual average of $84.50 per hundredweight.

Confusing as it may seem, the daily, weekly, monthly, quarterly and seasonal high in prices occurred in 2003, but the cyclical high, measured on an annual basis, occurred in 2004.

The cyclical high in prices for fed cattle already has occurred, but how about feeder cattle?

Seasonal price highs and lows occur at different times of the year for each market class of cattle due to distinct supply and demand variables that affect a particular market class.

Lightweight 400-to-600 pound feeder cattle prices usually are highest in the spring, when supplies are low and demand for cattle to place on grass pastures is greatest. Lightweight feeder cattle likely will reach seasonal and cyclical highs in spring 2005, with an extremely good demand for pasture cattle.

Very favorable moisture conditions are occurring in many of the cattle-producing regions of the United States, with above-average precipitation occurring from Southern California to Texas and extending to Indiana and Ohio.

However, some parts of the northern Plains and Pacific Northwest remain abnormally dry.

The heavier weight 700-to-900 pound feeder cattle prices usually decline seasonally from January to April, as increasing numbers of cattle from backgrounding lots and small-grain pastures are marketed. Prices then rebound to seasonal highs in the third quarter of the year, when the fewest are available.

The third-quarter 2004 seasonal high for heavyweight feeder cattle was likely the cyclical high as well. Prices for 700- through 900-pound beef steers were more than $125 per hundredweight at times during August and averaged about $117 for the third quarter. Prices were fueled by a relatively short supply of cattle and sharply declining corn prices due to the record corn crop that ultimately was harvested.

Cow prices usually increase into spring, when many beef cows are calving and the fewest are sold. Prices are lowest in the late fall, when normal culling occurs and the greatest number are sold. Prices in 2005 are averaging above 2004 levels and we should see a seasonal and cyclical peak in the late spring. Cow marketing will be at historically low levels and the current USDA rule does not permit more than 30-month-old Canadian cattle into the United States.

Bred cow and heifer prices also will reach seasonal highs in the spring. Prices are averaging from $100 to $200 per head above last year's levels and will continue strong, as interest in herd rebuilding intensifies.

Likewise, the prices for high-quality breeding bulls will follow bred cow prices and remain cyclically strong.

Therefore, depending on which market class of cattle you are interested in, the cyclical high already may have occurred or will likely occur in the next year.

Take care.

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