Here in the Ozarks, we are proud to be known as cattle country. Everywhere you look, it seems as if everyone has at least a few head of cattle in the pasture. According to the 2012 Ag Census, cattle sales were second only to grains, and keep in mind that the census was completed during the worst drought we’d seen in years, driving up commodity prices and pressuring cattle values. Since 2012, the market has seen big advances, with fed cattle prices reaching into unheard of territory. And with the decrease in the national breeding herd during 2012, those of us who were able to stay in the cow/calf industry were placed straight into the driver’s seat.
A question I’ve been asked time and again lately, though, is what is up with cattle prices right now? As of the end of the third week of September, the live feed steer price was $135/cwt, a 14 percent year over year decrease. Local prices for 500 weight steers averaged $222/cwt the same week, a 17 percent year over year decrease from last year’s $267/cwt in the same period.
There are multiple explanations for why prices are falling. The size of fed cattle is the largest they have ever been, meaning less are needed for the same production levels.
However, I’d like to take a step back and take a broader look at the picture. Just two years ago, in 2013, the local price for a 500 weight steer was $170/cwt, and five years ago, in 2010, it was $124/cwt. When compared with last week’s price of $222/cwt, that is a 131 percent and 180 percent increase in price, respectively.
Now, I would agree that seeing cattle prices tumble in the futures markets lately has not been pleasant by any means. When one gets used to $200/cwt or more, it’s hard to imagine making do with less. Many of us have made changes to lifestyles and farming practices that reflect the higher prices. Is that a bad thing? No, not necessarily. The majority of us have been cautious in making those changes, haunted by the experiences and stories of the 1980s and also fully aware that the markets couldn’t handle these prices very long and a price adjustment was bound to happen sooner or later. That’s why, as a loan officer and a former credit analyst, I have stayed conservative when making cash flow projections. I would rather make sure you, the customer, can have a comfortable living regardless of the changes in the livestock market, and know that any additional received per head is just icing on the cake.
So bottom line, am I worried about cattle prices? At this stage, not really, not yet. Watching the market makes its changes now – knowing here in the Ozarks we have an abundance of hay and grass on hand, feed prices are still low, and the cattle are fat and happy out in the fields – we are in a good position to make any needed changes to our operations, should the occasion arise. It is still a good time to be in the cattle industry and I for one am proud and excited that I am.
