Official: Cattle prices have stabilized
Hindsight is 20/20, especially for producers keeping an eye on cattle markets. While the industry is still recovering from a long-term downward trend, the past few months indicate a moderate upward climb in cattle prices.
Matt Diersen, SDSU Extension risk and business management specialist, believes that prices have stabilized. While foreseeing 2017 markets is anyone's guess, Diersen wouldn't be surprised if markets remain stable or even increase slightly from 2016.
"It's primarily good news," Diersen said. "We've been in an expansion phase in the sector, but expansion has slowed down. That's not going to flood the market with calves."
Several factors played into the all-time high cattle prices during 2014 and 2015. Conditions such as drought and the 2013 Atlas blizzard tightened the supply of cattle. Producers held back cattle in response to those stressors. Limited ability to expand caused a contraction in the national beef herd.
"It was unexpected to hit those levels," Diersen said. "It was a once in a lifetime type of payoff, but it was not realistic."
Blake Cooper seconds that comment. Cooper, who works at the livestock sale barn in Creston, Iowa, has seen cattle run through the Creston Livestock Auction for many years now and commented during the elevated markets that while high cattle prices were great for producers, too much of a good thing often leaves people unsatisfied due to unsustainability.
"You can only throw a brick so high," Cooper said.
Production problems in other protein sources occurring at that time, particularly within the poultry and swine industries, and high feed prices impacted not only consumer choices but also producer management decisions. Reduced cattle numbers and limited competition from other meat industries sent live cattle prices through the roof. But as those problems became resolved and the cow herd expansion spread across the U.S., the markets reflected the shift in the beef herd, lower feed prices, and decrease in weather extremes. Whatever goes up must come down, and markets are no different.
Feedlot extension specialist Warren Rusche admits that the subsequent events within the cattle market haven't been easy for producers to reconcile, especially considering that the beef herd expansion wasn't huge. While he acknowledges that the previous dollars per pound were not sustainable, he believes the market reflux may have been a bit extreme as well.
"The biggest source of frustration was that not that long ago we were drastically higher," Rusche said.
For producers who held on to calves this fall and avoided the slump in prices from September through November, backgrounding calves will have ended on a positive note. While the weather conditions haven't been the most favorable in regards to cost of gain and performance, Rusche believes that producers who backgrounded calves this winter will have a good shot of bringing in some money if markets remain stable.
"It seems like we've bounced off the lows from last fall," Rusche said.