Price swings this year have been less volatile than in past years.

July 16, 2018

3 Min Read
Feeder cattle cash market volatility diminishes

Cattle producers with summer stockers and cow-calf operations should be experiencing a bit less stress about the market this year, according to the Livestock Marketing Information Center (LMIC). Yearling steer prices (750- to 800-pound at Oklahoma City) averaged $145.13/cwt. during the first six months of the year, up from $138.68/cwt. over the same months in 2017. The price for steer calves for the first six months of 2018 averaged $176.98/cwt. compared to $167.37 during the same period last year. 

The increase in value was achieved while price swings in tPirce he market have subsided, LMIC noted. “The spread between the low and high prices during the first 26 weeks of 2018 was $17.77/cwt. for yearling steers. Last year, the swing in prices from the high to the low for the same weeks was $34.82.”

According to LMIC, analysis of annual yearling price volatility going back to 1992 shows that price swings this year are on track to be the smallest since 2012. Managing price swings is a challenge in the process of marketing cattle, the group added.

Based on monthly average prices, annual price swings from 1992-2002 never topped $20/cwt. Since 2012, however, annual price swings have been greater than $30/cwt. every year. In 2011 and 2012, the high-to-low price swings were $19.49 and $18.34, respectively. Annual price swings greater than $70.00 a year were encountered in 2014 and 2015, LMIC said, adding that during the last 25 years, the most frequent annual price range was $15-$20 (6 years).

“So far this year, the swing in monthly average prices has been $9.39. The difference between in the magnitude of price swings based on weekly versus monthly data makes a statement about how much price volatility has been experienced within some of the months, even though price volatility has been less than in past years.”

Yearling steer prices at Oklahoma City (750- to 800-pound, medium and large frame #1) in the latest week averaged $151.67/cwt. LMIC said the low monthly average price so far this year was $139.90.

“Given the price volatility that has been seen in the market in the first half of the year, an annual price range of $15-$20 has the highest probability, which infers that the chances for prices above $160 would not be a strong bet. It is also worth noting that the high monthly average price so far this year is only $149.29, making the current cash price look very good versus the monthly average to-date.”

With the new corn crop looking good, LMIC said feeder prices have responded well in anticipation of lower feed costs. 

“Feedlots have been aggressively bidding for cattle. Cash prices out of Western Kansas which had been dogging (negative basis) the August feeder cattle contract for weeks, suddenly flipped on the week of the acreage report. In the 4th year of expansion, aggressive cash bidders are a good sign for the industry even if it comes with some added volatility in the second half of the year,” LMIC noted.

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