CME: Pig Prices Still Down After Corn Price Rise
US - The drought induced mess that is 2011 seasonal feedlot placements has mostly everyone trying to guess how seasonal feeder cattle prices might differ this year from normal patterns, write Steve Meyer and Len Steiner.
Dr Derrell Peel, Oklahoma State University Extension
Livestock Marketing Specialist, offered a very good discussion of
the 'normal' pattern and the factors that might change it this year n
the 29 August edition of Drovers Cattle Network.
The article can be
found here but here are some highlights:
- Feeder cattle prices are usually near their peak in August and then
drop the rest of the year. This is born out by seasonal price
indexes prepared by the Livestock Marketing Information Center
which appear at below. July actually has the highest seasonal
index but the indexes for July, August and September are,
for all practical purposes, equal.
- The ten-year average index suggests a drop of about $10-12/
cwt for 525-lb. medium/large frame number one steers from August
to November. The decline for 725-lb. feeders would be four to five dollars/cwt.
- Several factors suggest that this year may be different.
- Seasonal patterns have changed from spring peaks to
summer peaks but higher feed costs may shift the industry
back towards spring peaks.
- Corn prices are keeping feedlot ration costs very close to
the level where feeders and fed cattle have to trade at
even money for cattle feeders to break even. Continued
high prices of corn will limit feeder cattle premiums, especially
at heavier weights.
- This year's drought has changed both the supply and demand
situations for this fall. Dry conditions will harm feeder
cattle demand by delaying or limiting prospects for
wheat pasture. That would normally put great pressure on
feeder prices except for the fact that the same drought has
caused significant early marketing of calves, tightening the
supply that will be available this fall. Dr Peel believes that
these early sales will result in little or no price pressure on
fall calf and stocker prices.
- Finally, this year will see significant variations in normal regional patterns. Calf prices in Oklahoma are currently about 10 per cent lower than in Nebraska- a larger-than-normal spread between the two regions primarily driven by drought in the south and much better forage conditions in the north.
- Seasonal patterns have changed from spring peaks to
summer peaks but higher feed costs may shift the industry
back towards spring peaks.
![](contents/cme.jpg)
Bottom Line: Seasonal price pressure should be less than normal
this fall, especially for calves.
Another Oklahoma State University professor, Dr Damona
Doye, offers some excellent insights into the financial
and management impacts that the drought might be having on
southern cattle operations.
Her video interview can be found at
www.sunup.okstate.edu — click on Dollar Signs and Drought.
Weaned pig producers that sell on the spot market
have been hit extremely hard by high feed prices this summer.
As can be seen below, prices of these 18-12 day old, 10-12 pound
pigs plummeted in April when corn prices rose and have recovered
little since then.
Iowa State University estimates that these pigs
have cost $40-$44/head to produce this summer so you can see
that losses have been huge.
Most pigs are sold on long-term contracts
and the average price of those contracted pigs has hovered
near $40/head since early 2010.
But pigs on the spot market are
risk with huge profits (see those $60/head prices in January?) and
huge losses always possibilities. One factor that contributes to
losses is that farrowing farms have no place to store these pigs
waiting for a better price. When it’s time for them to go, they have
to go and owners have absolutely no leverage.
![](contents/cme1.jpg)
Further Reading
![]() | - | You can view the full report by clicking here. |