Chris Prevatt, UF/IFAS Livestock & Forage Economist, Range Cattle Research and Education Center
Each year there are windows that allow producers to market feeder cattle near the high-end of the market. Cattle producers will likely be marketing cattle throughout 2022 at prices that are at six-year highs. While this is great news, we still need to develop a marketing plan for our feeder calves. The main method I use to guide my marketing decisions is by comparing the relationship between the futures price (CME Feeder Cattle Futures) with the current market price (CME Feeder Cattle Index Price). The difference between these two prices provides us with the market’s expectation of price movement in the short run and will guide us toward the markets expectation of where the high-end of the market exists.
Table 1 below compares the current Chicago Mercantile Exchange (CME) Feeder Cattle Index Price with 2022 CME Feeder Cattle Futures Contract prices for the remainder of the year.
For this example, I will use the current CME Feeder Cattle Index price and the August 2022 Feeder Cattle Futures contract prices. On Thursday, February 24, 2022 the CME Feeder Cattle Index was $161.82 per hundredweight (Reporting Date: 02/23/2022) and the settlement price of the August 2022 Feeder Cattle Futures Price was $181.73 per hundredweight. Therefore, for producers that are looking to market cattle off the August 2022 Feeder Cattle Futures Contract, the markets current expectation is for Feeder Cattle prices to increase from $161.82 per hundredweight to $181.73 per hundredweight. The market is pricing in a $20 per hundredweight ($159 per head / $9,955 per truckload) increase between now and the expiration of the August 2022 Feeder Cattle Futures Contract. Please note, both the index and futures prices are based on an 800 lb. Feeder Steers with a basis of a 12-State Region of the Northern and Southern Plains. Therefore, adjustment is likely needed to be applied for your individual situation.
Take Home Message
As you can see in the table above, the CME Feeder Cattle Futures Market currently expects feeder cattle prices to increase each contract month from April through November. A similar scenario has played out in each of the last five years with the price highs occurring during the second half of the year. Therefore, the key piece of information that we can take away from this analysis is that revenues will likely increase each month during 2022. Knowing that the highest priced feeder calves are expected to be marketed late in the year, each operation should begin developing a management plan to add additional weight economically to their feeder calves.
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