Most U.S. beef producers manage their livestock around forage-driven production systems. And because beef producers mostly calve in the spring, they wean and market their calves in the fall. This causes a supply bulge that over time has resulted in seasonally lower calf prices (Figure 1).
While every year will have its own price pattern, fed-cattle prices generally follow this same trend — higher in March, averaging about 8% above the annual average. Meanwhile, August-November fed-cattle prices tend to be about 5% below the annual average price.
Nobody can accurately predict how or when the cyclic variations in cattle numbers will affect cattle prices. But most seasonal price flucutions can be very predictable — enough to cause some producers to manage calving dates to match seasonal market opportunities.
And depending on the region, fall and winter calving allows those producers flexibility in meeting seasonally higher prices. But, as they will attest, they must then compete against their neighbors who follow local marketing trends, as well.
Overlaying the effect of seasonal prices within a sale period is calf weight, which may affect price more than anything else. Generally, lighter calves bring more per pound than heavier calves.
In years when corn is high priced, feedlot operators prefer to buy weight (heavier calves) rather than feed it on, so the price of heavier cattle improves relative to lighter feeders. Conversely, decreased corn prices increase the price of lightweight calves relative to heavier feeders because cattle feeders feel they can put the weight on cost effectively due to less expensive feed.
Few price graphs (Figure 2) show opportunity in the marketplace better than the seasonal slaughter-cow price data. Data for utility slaughter cows indicate that the increase in price from November to March of the following year averaged about $6/cwt. since 1997, equivalent to an increase of about 14%. This equates to about $72/head for a 1,200-lb. cow.
Since most market cows in the U.S. are sold between October and January, the marketplace is flooded and prices are lowest at that time. When a cow is determined “open” at preg-check, we want to get rid of her as soon as possible.
The quicker she can be sold, the sooner she is out of our hair and the less money we throw away supporting her. This is a true and logical argument, but it bypasses an opportunity in the marketplace offered by seasonal price patterns.
Clint Peck is director of Beef Quality Assurance, Montana State University.
For more information go to: www.oznet.ksu.edu/library/agec2/mf2547.pdf