Cattle markets are getting back on track

Oklahoma auction prices for steer calves have bounced off the recent lows (Figure 1). Calf prices normally reach a seasonal peak at the end of the first quarter, so steer calf prices may not recover fully to the March highs. However, the strong general uptrend in cattle markets likely means calf prices may move more sideways for a period before moving higher in the later part of the year. Concern about summer grazing conditions could temper stocker demand in the next month or so. In Oklahoma, drought conditions have been reemerging quickly, with the percentage of the state showing abnormally dry conditions or low-level drought increased from about 34 percent in March to nearly 66 percent in the most recent Drought Monitor. However, the outbreak of storms the last weekend of April provided needed moisture in parts of the state, accompanied, unfortunately, by numerous tornados.

Heavyweight feeder cattle prices have bounced more than calf prices buoyed by recovery in Feeder futures and seasonal tendencies for higher prices from now through the middle of the year (Figure 2). Despite the unexpected shocks that have impacted feeder markets, feeder prices are proving to be very resilient. Feedlot demand is strong as feedlots chase limited feeder cattle supplies, spurred on by declining feedlot cost of gain. For all feeder cattle, both calves and big feeders, the highest prices of the year are expected in the fourth quarter.

On January 1, the estimated feeder supply for the U.S. was down 4.2 percent year over year and was the lowest in data available back to 1972. However, the Oklahoma estimated feeder supply on January 1 was up 6.7 percent year over year, reflecting better winter wheat grazing conditions and more stockers on wheat. The weekly volume of feeder cattle in Oklahoma auctions was higher from late February through March, reflecting marketing of cattle off of dual-purpose wheat. Auction volumes have been sharply lower in April but some additional graze-out cattle may be sold in May. Despite the larger feeder supply in the state on January 1, the auction volume of feeder cattle for the year to date in Oklahoma is down 8.7 percent year over year.