CME: Fed Cattle Prices Less Seasonal than Hogs

US - Seasonal price variation is a given in livestock and meat markets, write Steve Meyer and Len Steiner.
calendar icon 12 August 2010
clock icon 4 minute read

Seasonality is one of the three major price patterns for agricultural goods, the others being trends and cycles. Seasonality describes price variation that occurs within a calendar year or across the seasons of a year. Seasons vary from species to species and from product to product within the species. The charts below show seasonal price indexes for slaughter hogs, fed steers and feeder steers over the period 2000-2009. The indexes are computed by the Livestock Marketing Information Center and are true indexes in that they state each month’s average price in terms of the annual average. The blue line in each chart shows the average index for the 10-year period will the other two lines show the maximum and minimum index during the 10-year period for each respective month. We have placed vertical lines on the August observations for easy reference to the historical seasonal level for the current month.

As can be seen, hog prices are, on average, much more seasonal than are prices for the two categories of cattle covered by CME futures contracts. The average hog price index peaks out in June at 1.11 and bottoms out in November at just under 0.90. Those numbers mean that, again on average, national weighted average base prices peak at 1.11 x the annual average price in June and bottom at .90 x the annual average price in November. The primary driver of this seasonal patter is the supply of market hogs which usually falls in summer months and reaches annual highs near Thanksgiving.

Prices for fed cattle are much less seasonal than those for slaughter hogs. The fed steer average index for the 2000-2009 period barely moves away from 1.00 which represents the annual average price. In fact, the only significant deviations are in June- August when the average index dips to only about 0.97. The summer seasonal low for fed cattle price is driven by supplies of marketready cattle that are usually at their highest levels of the year. One reason for the muted seasonal pattern for fed cattle is the cattle feeders have historically had more freedom in the timing of marketings than have hog producers who are generally forced by capacity constraints to market on a set time schedule.

The seasonality of feeder steer prices is intermediate to those of slaughter hogs and fed steers and both supply and demand play important roles in the feeder steer seasonal pattern. Spring lows are the result of ample supplies of cattle coming off of wheat pasture near the major Southern Plains feedlots and relatively soft demand for feeder cattle prior to hot summer feeding periods. Large numbers of spring calves and yearlings coming off of summer grass are available in the fall but feedlot placements are at their highest in September and October as yards get cattle started before the onset of cold weather. Good demand offsets higher supplies to keep feeder cattle prices relatively strong all the way through December.

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