Ranchers marketing early | Cattle prices down in August, although still high by historical standards
Cow-calf producers are looking anxiously at the fall run as cattle futures slip and hog prices plunge.
Will prices still be lofty by the time farmers move their calves?
“Guys are excited. With prices they were (this summer), the fall run couldn’t come fast enough,” said Brian Perillat of Canfax.
“This is going to be probably the most profitable year for cow-calf producers ever, in quite a long time anyway.”
However, the record high prices of July and subsequent sell-off through August have provoked many producers to do their calf marketing early, bringing forward sales that they would normally not make until the autumn.
Read Also
Critical growing season is ahead for soybeans
What the weather turns out to be in the United States is going to have a significant impact on Canadian producers’ prices
“A lot of guys have marketed their calves well ahead of schedule,” said Perillat.
The calves won’t move until the fall, but many farmers have used satellite sales and contacts with feedlots to lock in fall prices to avoid a possible slump.
The August decline of cattle futures prices, which has seen October feeder cattle drop from almost $2.25 per pound to less than $2.10 per lb., has rattled people throughout the cattle industry.
Prices are still sky-high by historical standards, but cattle buyers are worrying about the spreads that can suddenly reverse cattle-feeding margins from big profits to huge losses.
As well, the selloff in hog futures has demonstrated how profoundly prices can slide once the momentum shifts.
“To me, there’s no way the cattle can stay up with the collapse of the hogs,” said Errol Anderson of Pro Market Communications.
Chicago lean hog futures swooned from $1.18 per lb. near the beginning of July to 92 cents recently, stunning analysts and producers who thought the bullish outlook would be enough to avoid a severe correction to the high prices.
Anderson, who thought feeder cattle futures had peaked when they hit $1.96 per lb., said many cattle feeders are leery about going back into futures to hedge because margin calls were so extreme when the futures surged over $2.20 this summer.
However, with the hog example in front of everyone, many feeders have recently been buying puts to cover the risk on their future fed animals.
“If you just go in here and blindly buy calves without (covering) risk, it could just be an intense risk on the feeding side,” said Anderson.
While the fall calf run outlook is less rosy for farmers now that prices have settled back, Perillat said the calf supply still seems restricted. As well, many farmers have already priced their fall calf sales, which means feeders will still need to actively bid for remaining unpriced calves to make sure they can operate at full capacity.
