FALL CALF MARKET 2024

Some of our customers have been inquiring about our expectations and insights for the fall calf market. I wanted to share a few of my observations and general thoughts on the current market situation.

• While prices have come down in the last few weeks, they are still the highest in history. The calves you sell this fall will fetch the highest prices you’ve ever received.

• Fundamentals in the cattle market are solid and actually getting better. Retail beef prices are record high and getting higher and demand is excellent. Slaughter of fed cattle is going down as the industry deals with less numbers. Feedlot placements are lower YTD which means less supply in the months ahead. Cow numbers are low and retention is not occur- ring yet. Finally, corn prices are the lowest in years as the US is dealing with a record crop.

• The cattle market is actually performing exactly as was forecast months ago.

  What is causing concern in the market right now? The main issue is that the entire cattle futures complex has been under significant pressure in the past few weeks. This has affected the prices of yearlings and calves to some extent, but not as much as the drop in futures prices. Why has this happened?

  1. In the past few weeks, there has been a decrease in the prices of all commodities such as grains, steel, aluminum, copper, oil, and lumber. This is due to the end of an inflationary peri- od, leading to a moderation in prices and a decrease in demand for goods. Traders are selling off commodities in general, including cattle, despite the positive fundamentals.

  2. Cash prices of cattle are much higher than the futures. This is called a strong basis envi- ronment. When cattle are priced against a lower futures market, their value decreases. This is reflected in forward sales, where cattle for immediate delivery are worth more than those for future delivery. The lower futures market is particularly affecting the value of the calves, as they are marketed next year.

  So, what are your marketing options? I think these are the most common options with some things to think about.

  1. Forward Delivery. Some things to think about here. Remember that you’re pricing your calves against a futures market that has been under a lot of pressure recently. Also, not many agricultural consultants would recommend selling your entire crop on one day, but never mind, the same day every year. Also, when you sell your calves this way, a lot of the responsibilities and costs that the auction market has traditionally carried now fall on you. You will now be responsible for some sorting, loading, weighing, and feeding. Additionally, you may sell your calves to different buyers, which could require loading at different times or even on different days. Be prepared to handle this. Make sure you know what you have. Averaging 525 lbs is sig- nificantly different outcome then averaging 575 lbs as 50 lbs equals $250/head.

2. Auction Market. You can sell at auction whenever you choose, but you will take the price of the day. All the details and hassle are taken care of.

3. Sell In Portions. Sell a portion of your inventory and retain some until spring. Typically, peo- ple keep lightweight steers and heifers and add some weight to them. This can take advantage of a higher spring market and average out your price risk.

4. Backgrounding. Background all the calves till spring. This transfers all the price risk to the spring. However, feeding calves over the winter comes with health risks, labor, interest costs, and carries no guarantee it is a better market in the spring.

I’ve been trading in this market for almost 30 years and have made plenty of mistakes in the pro- cess. Just like you, my livelihood depends on this market, and I have to make investment decisions for myself and my family every day. One thing is certain - no one can predict what this market will do - no one! All I can do is share my own thoughts while making my marketing decisions. Re- member, it’s impossible to make a mistake here. Despite the recent downward pricing, your calves are more valuable now than ever before. As a cow-calf producer, you’re in a powerful position. So, don’t focus too much on the negativity. It is a fantastic year. Calves will be high all fall.

I want to share my personal thoughts. First, I am hesitant to price any inventory in the current market environment. The cattle market has much stronger fundamentals than what the futures are currently projecting. I believe we will see improvements in the futures in the next few weeks. Sec- ond, the weight of the calf is crucial for your earnings. An additional 50 lbs on your calf is worth $250, so keep that in mind. The total price of the calf depends more on its weight than on its price. The price per pound is less important than it has been.

Remember, the market is currently strong and has the potential to improve further. So time is on your side. There’s a lot of unnecessary negativity out there, considering the actual situation.

If there’s anything we can assist you with, please don’t hesitate to reach out.
Also, keep in mind that all my comments are worth exactly what you paid for them!

Ian