Feeder Prices Outpacing Seasonal Trends

Feeder price performance this Fall has not followed the seasonally expected trend of lower prices from August to October. Cattle prices generally follow seasonal patterns due to when calves are weaned and sold, when grazing pastures are available, seasonal beef demand, etc. Past performance of prices during this period suggests that prices for 500-600 lb. steers would decline about 7.5% on average from August to October. This year, however, prices were about 2% higher in October than in August. This suggests that prices are about $13 higher per hundred pounds than we would’ve expected if normal seasonal patterns held.

The seasonal price index was constructed using data from 2011 to 2017. It represents how much monthly average prices differ from annual average prices. This is calculated by dividing each month’s average price by the average annual price. Next, the monthly average across the years of data is calculated to obtain an average price index. The price index calculated in this article has a base value of 1. This implies that if a given months price index is 1, the average price in that month is equal to the average annual price. If a monthly index value is 1.05, then the average price in that month is five percent higher than the annual average.

The fact that prices are outperforming seasonal norms during a time of increasing supplies begs the question of whether the normal price patterns will hold in the coming months. For instance, October is usually the time of the lowest within-year prices for 500-600 lb. steers in Mississippi. Did the low-point occur earlier this year? Or will it be later? I would lean toward the low-point having occurred earlier. Current Spring futures prices are allowing profitable stocking opportunities and fed cattle prices have improved to increase packer margins. Each of these points provide support for feeder prices as they suggest that potential buyers still see profitability, even if the prices are higher than the time of year might suggest.

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