By Julie Tomascik
Associate Editor
Highs and lows—in weather and prices—have left Texas ranchers facing an unsettled market.
In a normal year, the market was expected to increase throughout the fall. But this year was different. A sharp downturn occurred in September, showing market prices can be shocked at any time.
“Such a sharp break at this time of year really got folks’ attention,” said John Anderson, deputy chief economist for the American Farm Bureau Federation (AFBF). “When markets are moving hard against the normal, seasonal expectations, everybody draws in to wait and see what’s going on.”
And that’s what happened from September through October, making the cattle market tough to assess.
The market shock came from an abnormal amount of heavy fed cattle heading to the packinghouse following a summer of low grain prices.
“Feed yards had plenty of signals telling them to make the most of cheaper feed and tight cattle supplies,” said Tracy Tomascik, Texas Farm Bureau associate director of Commodity and Regulatory Activities.
And many of them did. Feeding cattle to higher weights and delaying those sales led to a large supply of market-ready cattle and a need to get them out of feedlot inventory.
“That unusual sell-off dropped prices during a time when we expect to see a fall rally and prices steadily add $1 to $2 through the end of the year,” Anderson said.
That drop was followed by a sharp, three-week rebound as October markets came to a close. Anderson noted fed cattle prices rose around $16 per hundredweight during that time.
“We had a nice little bounce from the lows that we saw, but we really don’t have a lot of life right now,” Anderson said.
And a report from the International Agency for Research on Cancer (IARC), part of the World Health Organization (WHO), that classified red and processed meats as probably carcinogenic to humans had a slight effect on the futures market. But Anderson doesn’t expect the report to have much impact on the market going forward.
As the volatility subsides and prices settle, ranchers hope for a more normal market heading into the winter.
“Market-ready, fed cattle have been plentiful. And they’ve been big,” Anderson said. “That put a lot of pressure on the fed cattle market. As we look ahead, we’ll be working through those front end numbers for the remainder of the year.”
The market is still fundamentally strong, he noted. Global demand for beef is high, but the U.S. supplies needed to meet it remain tight.
And, while a recovery is expected later this year and into 2016, record prices aren’t. Competing proteins will likely keep pressure on beef prices, Anderson said.
The cattle market is a game of highs and lows. Holding and selling. And taking a gamble.