Volatility has been rampant in the cattle market, week to week in the cash market and daily in the futures, write Steve Meyer and Len Steiner.
Arguments can be made as to why this is happening and if we will ever see “normal” again.
Stepping back a bit, we analysed the recent state of some fundamentals in the fat cattle cash market, that have played at least some part in recent weekly cash price movements. The table below depicts the numbers that will be discussed.
AMS weekly reported fat cattle cash or negotiated prices were taken for representative weeks over the past few months for multiple regions that are included in the five market average.
The goal was to dissect how live weights and prices have changed from August to November, for steers and heifers between regions that make up the five market average.
The beginning of August was just prior to the cash market collapse, and it can be seen in the table that during the week of 2 August, fat cattle showed even prices across the US indicating a national type market.
Heifers were also going for a premium to steers that week, a consistent trend across the four weeks that were analysed. The heifer to steer premium indicates the market was already chasing lighter weight cattle.
As we move on to September and even more so in October, significant differences become apparent in cattle weights and prices between regions, and heifer premiums were for the most part increasing into October.
Within regions, the largest weight increases between time periods showed up in (southern) Iowa, Minnesota and Nebraska (probably largely eastern Nebraska) steer and heifer data, through October.
These are also the regions with the larger cash discounts to the five market average. Those discounts carried into the week of 8 November, indicating that although live weights had come down, the market ready cattle backlog was still a regional concern.
Another interesting note is all regions have seen a shrinking premium on heifers compared to steers, except Nebraska where they retain a historically large premium.
Moving between the time periods analysed, more apparent price differences between regions pop up, serving as a reminder that although this market is usually thought of in a national context some very distinct regional differences can occur.
Texas-Oklahoma-New Mexico and Kansas carried consistent premiums, compared to the five market average price, from September on.
Again, we assume this is the market indicating demand for lighter weight cattle as these two regions were 50 to 150 pounds lighter than Nebraska, Iowa and Minnesota each of the weeks analysed.