Feeder cattle pricing versus historical average indicates a slowing of the market surge.

Nevil Speer

March 26, 2015

2 Min Read
Industry At A Glance: How much additional market risk can cattle feeders absorb?

While feeder cattle prices are off their highs from 2014, the relative strength of the feeder cattle market continues. This week’s Industry At A Glance depicts an important relationship surrounding the feeder cattle market. Prices on the horizontal axis represent predicted feeder cattle prices (based on data between 2005 and 2013), while feeder prices on the vertical axis reflect the actual CME Feeder Cattle Index.

Every week since Jan. 1, 2014, has resulted in the CME Feeder Cattle Index pricing above the predicted value. In other words, cattle feeders are aggressively chasing cattle. Perhaps most surprising, that trend has continued in 2015 despite negative closeouts and a stagnant fed cattle market (versus 2014 in which cattle feeders were seemingly perpetually rewarded to bet on a surging fed market).The procurement of feeder cattle is a difficult and complex situation each and every week. The primary question going forward surrounds how long this positive feeder market scenario can persist. Much of the answer revolves around the feeding sector’s risk appetiteWith this analysis in mind, how do you foresee the feeder market shaping up in the coming weeks and months? Will cattle feeders continue to support the market by chasing cattle to ensure operating at optimal capacity levels? Or will negative closeouts begin to drive prices lower?

Leave your thoughts in the comments section below.

 

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About the Author(s)

Nevil Speer

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.

Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
 
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs.  He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
 
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
 
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.

Contact him at [email protected].

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