Climbing cattle prices: Ag officials happy after 'shockingly low' 2016
After devastatingly low cattle prices in 2016, South Dakota producers this year are smiling.
Prices for cattle across South Dakota unexpectedly increased in October and have held steady through November, leaving many producers pleasantly surprised, according to Matt Diersen, a South Dakota State University Extension risk and business management specialist.
"Higher calf prices tend to be good for South Dakota and the farm sector," Diersen said. "So that's good news for the South Dakota economy really at the end of the day. The prices have been higher consistently here so that should be pretty good news statewide."
In feeder steers alone, the prices have increased between approximately $35 and $45 per hundredweight from 2016, according to the U.S. Department of Agriculture's South Dakota weekly summary released on Nov. 11.
And for some farmers, this can mean a lot of cash. For example, Diersen said in the 500-600 pound category of feeder steers, the price jumped from $141.28 to $186.17 per hundredweight this week. If a calf weighs in at 550 pounds, producers are looking to make approximately $1,024 this year whereas last year they'd earn $247 less at $777.
"Back up to last year at this time, people were complaining about how low prices were. And they were sort of shockingly low and lower than expectations at this time. You're comparing really decent prices now to what was a really undesirable price a year ago," Diersen said. " ... So that's why they're happy."
As to why the sudden increase, Diersen said one of the biggest and common factors affecting both the low prices of 2016 and increases in 2017 are due to feedlots. The lots, approximately a year and a half ago, began losing money after consistently selling cattle at such low prices. With not a lot of cash to spend, the prices were "really pushed down" well into the fall season.
Yet this allowed producers to also buy cattle at low prices, turning it into a profit, Diersen said. And with producers back to having enough money to spend, this increased market prices this year, Diersen said.
"You've had this profit swing really low and then come back in the feedlot sector," Diersen said. "The other thing that happens is you finally got some real positive outlook and the ability to do something about the positive outlook for where prices are headed in 2018."
Diersen added that harvest, specifically the corn crop, has also played a role in this year's cattle prices. Since yield came in better than anticipated, Diersen said corn became more affordable for producers, giving a "last little boost' to cow and calf feed prices.
And Lanning Edwards, an auctioneer and field man for Mitchell Livestock, agrees with Dierson, adding that with lower feed costs, producers saved some dollars.
"It's been a nice increase compared to a year ago," Edwards said. "We sure hope it stays at that kind of level. We need this to work for everybody ... It's kind of a full circle deal, it's got to work for everybody or else it doesn't work at all."
But while this year is looking really bright for cattle producers, Diersen said it's not the best years of recent. Diresen cited 2014 and 2015 of examples when prices were even higher than they are this year.
Diresen said several factors, including pork and poultry production issues, made it difficult for producers to bring meat to the market, along with drought conditions gave way to "very, very high prices" for two years.
And even though prices aren't has high as they were two years ago, producers are still happy.
"It's just a nice turnaround for everybody," Edwards said. "So that's a plus."