Excessive grain costs have been the main focus of a lot dialogue in 2022. As I write this, CME© corn futures are buying and selling within the mid-$6 per bushel vary by way of subsequent summer season. This story is probably going finest instructed by trying on the chart under, which summarizes feed value per lb of acquire from Kansas State’s Concentrate on Feedlots information. The newest feed value of acquire estimate from taking part feed yards exceeds $1.35 per lb. And projected value of acquire is even increased for cattle which can be presently being positioned. As a comparability, the typical feed value per lb of acquire was about $0.79 from 2016 to 2020. Excessive value of acquire incentivizes the location of heavier feeder cattle into ending applications.
Present feed costs don’t make the location of sunshine cattle on feed very enticing, which is stopping calf markets from reaching value ranges they’d attain in a extra regular feed value setting.
I need to use this as a backdrop to debate how feed value ranges impression seasonal value patterns in calf markets. In most years, calf markets attain their highs within the spring as mild weight calves are being positioned into grazing applications. The decrease value of acquire from grazing leads to increased calf costs as stocker operators compete for calves.
As grazing alternatives disappear within the fall, feed costs grow to be a serious driver of calf values and we are likely to see calf markets put of their seasonal lows. The costlier feed turns into, the decrease calf markets go. So, excessive feed costs are likely to amplify the conventional seasonal patterns in calf markets. The upper feed costs are, the bigger the differential between the spring and fall calf costs.
As we take into consideration this fall and the approaching spring, I needed to say two different elements which can be related, however extra distinctive to this yr. Whereas grazing alternatives are primarily a consideration within the spring, grazing cattle on winter wheat pasture is definitely an exception.
Given the dry climate within the Southern Plains, one would moderately count on that fewer calves have been positioned on wheat pasture than regular, which has possible additionally hampered calf costs this fall / winter. Had wheat grazing circumstances been extra favorable this yr, I believe we might have seen a barely increased calf market.
Secondly, the quantity of carry in CME© feeder cattle futures will have an effect on value enchancment between now and spring. Calves which can be being positioned into backgrounding applications now will probably be offered within the spring of 2023, whereas calves being positioned into grazing applications subsequent spring will probably be offered within the fall of 2023.
At the moment, fall 2023 futures contracts are buying and selling at a $10 to $15 premium over spring 2023 futures contracts. It is a vital distinction in anticipated worth that must also be mirrored in increased calf costs this spring. Put merely, if regular grazing alternatives exist, quite a lot of enchancment must be seen within the calf market over the following a number of months.
Supply: College of Kentucky
