Cattle costs have been on a robust experience in 2023. Many producers shall be promoting spring-born calves within the coming months and are more likely to be a lot happier with the income earned than they have been when promoting calves throughout the previous few years. Feeder cattle costs within the Southeast are up roughly 40-50% above year-ago ranges and present expectations are for that energy to proceed into 2024.
The chart above reveals futures contract quotes for the entire at the moment traded CME contracts. Futures contracts are standardized, and every contract terminates on the final Thursday of the contract month. For feeder cattle, one contract is 50,000 kilos and the CME Feeder Cattle Index is used to settle the contract. The CME Feeder Cattle Index is a seven-day weighted common calculated utilizing transactions of 700-to-899-pound steers from a 12-state area in the course of the U.S. (extra data about this index is accessible at this reality sheet). For example, the August 2023 contract will terminate on Thursday, August thirty first and can settle primarily based on the CME Feeder Cattle Index calculated with transactions from August 25-31.
For the reason that contracts are standardized and have a set ending date, futures quotes may give perception on value expectations for the remainder of 2023 and Spring 2024. Contract costs are greater all through the autumn months earlier than dipping barely throughout the first few months of 2024. This dip is pushed by seasonal manufacturing/provide patterns as costs for 700-to-900-pound steers are usually weakest throughout the late winter and early spring earlier than rising into the summer time months. A few of this seasonality could be seen within the 2017-2021 line on the chart beneath.
It’s also value noting that the seasonal patterns differ throughout weight courses. 500-to-600-pound steers are usually weakest within the early fall, though these seasonal patterns could be muted throughout years when general costs are on a robust up pattern (like this yr) or down pattern.
There’s nonetheless a lot optimism in cattle markets. Provides have tightened and there’s no indication that cattle numbers are increasing very quickly. The most recent USDA WASDE report initiatives U.S. beef manufacturing shall be down 4% this yr as in comparison with 2022, and their forecast for 2024 could be a further 9% decline from the 2023 projection. The sturdy rally in cattle costs this yr, and the expectations for sturdy costs as we transfer into 2024, are reflective of this underlying tighter cattle and beef provide state of affairs.
