Cattle markets have been off to the races this summer, University of Tennessee ag economist Andrew Griffith says, likening the markets to a famous Olympic sprinter.
“What do cattle markets and Usain Bolt have in common?” he says. “They set records. The answer could have been ‘they race to the top,’ but setting records is what cattle prices have been doing lately. It is unlikely Usain Bolt could set records at the pace the finished cattle market is doing it.”
Finished cattle prices have moved higher despite the summer heat and show who is holding the leverage, Griffith says.
“The higher finished cattle prices in the heat of summer is clear evidence of the leverage held by cattle feeders over the packing industry,” he says. “It is also clear that packers are willing to compete to secure inventory to maintain line production. These are all welcome circumstances to cattle feeders who continue to pay higher prices for feeder cattle. Higher finished cattle prices are necessary to maintain a positive margin.”
Steer and heifer prices have seen significant increases this year.
“These prices and per head values are extremely advantageous for cow-calf producers who have been burdened by high input prices and low cattle prices the past several years,” Griffith says. “However, it also means any heifers retained for breeding have a lofty price tag since they could be sold in the current market. From the stocker-producer and feedlot side, higher cattle prices simply mean there is an increase in financial risk as there is a higher capital outlay for seemingly the same return per head. At the same time, there is a lower rate of return on the capital, and if it is borrowed capital then it is likely at a higher interest rate than in the past several years.”
He expects the bred heifer market to rise and producers try to rebuild the national cattle herd after years of liquidation.
“Alternatively, the bred heifer market is expected to strengthen as producers look to grow the cattle herd in certain regions of the country,” he says.