Current Auction Price for Beef Cattle

The feeder cattle market has experienced a significant amount of price variation between March and July. There has been upward price pressure from historically strong retail meat need and meat exports to China. While there have been positive price movements for feeder cattle, virtually of the downwardly price pressure has come over the dubiousness of fodder production and higher grain prices. Worsening drought conditions in the Western United States have caused feeder cattle and choose cows to come to market earlier and higher grain prices due to low stocks-to-use ratios and worsening global corn product have caused a run-up in grain prices lowering a feedlot's demand for feeder cattle. Both increasing the supply of feeder cattle from producers and decreasing the demand for feeder cattle from feedlots can consequence in lower feeder cattle prices.

Sources of Prices for Future Delivery

Price (formed at the intersection of supply and demand) is the betoken feeder cattle producers respond to about whether to retain or sell feeder cattle. So where do feeder cattle producers go for price information about delivery of feeder cattle in the hereafter? There are two primary market signals. The start is the futures market. These prices, available at the Chicago Mercantile Commutation (CME), represent the global need for feeder cattle. An expected local greenbacks price can be estimated by calculation a historically observed basis to the futures cost that aligns with the delivery month of involvement. The advantage is that these cost signals are available many months in advance of when production is physically sold in the cash marketplace and offering daily toll signals. The second is video auctions. These are production contracts where the buyer and seller agree on a price for a given ready of cattle characteristics to be delivered at a sure calendar month and location. The advantage is that the cash cost is known before delivery. One of the primary differences betwixt these two forms of contracts is that CME contracts are standardized and video auction contracts tin embrace more details about the cattle. While both have advantages and disadvantages, they each provide important market information, regardless of if they are used by feeder cattle producers. In this commodity, I review what the video sale and futures marketplace is suggesting what the local cash cost for feeder cattle volition exist in Autumn 2021.

Video Auction Prices

So, what are video auctions telling producers almost potential expected Nebraska feeder cattle cash prices in Fall 2021? I answer this by using publicly available information taken from USDA-AMS for the Superior, Northern, Western, and Torrington Video Auctions between January 2021 to July 2021. I restrict my focus to steers or heifers, musculus grade 1 or 2, either a large or medium frame, sold in the North Key Region (CO, IA, MT, ND, NE, SD, WY) that are set to be delivered in either September, October, or Nov and are not associated with price discounts or premiums.[1] In total there have been 127 lots sold totaling approximately 43,000 head with an boilerplate lot size of 336 head.

Effigy ane plots the individually observed transactions segmented by steers and heifers. Points represent individuals lots sold at a given weight and price. The size of the dot represents the number of caput within the sold lot. Larger dots indicate more cattle in the lot for a given weight-price betoken. The solid line and shaded area represent the price-weight slide and one standard error from the average. The wider the shaded area, the more uncertainty in that location is about toll at a given weight. To detect out what the video market could pay, on average, for feeder cattle, find a specific weight on the x-axis, get up till you reach the sold red or greenish line, then draw a horizontal line to the y-axis to notice the price. This can provide some indicate for what the cost will be.

Currently, at that place are premiums for some heavier feeder cattle (650-775 lbs.). This aligns with market place expectations of currently higher corn prices with expectations that prices volition come downwardly at harvest. With college grains prices, feedlots want to identify heavier cattle to not feed cattle as long effectively lowering their price per lb. of gain. Fewer heifers have been sold relative to steers and the prices received are much more variable. Some heavier heifers are as well receiving premiums relative to other weights. The video sale prices for steers and heifers and various weights and delivery months are displayed in Table 1.

Feeder Cattle Futures

So, what are CME feeder cattle futures (adjusted for Nebraska historical ground) telling producers about potential expected Nebraska feeder cattle cash prices in Fall 2021? I answer this by using publicly reported data from CME and USDA-AMS compiled by the Livestock Marketing Information Center (LMIC). CME offers standardized l,000 lb. contracts for 700-899 lb. feeder cattle steers available for delivery in September, Oct, and November. The feeder cattle contract is electronically settled using the CME Feeder Cattle Alphabetize rather than physically delivered. The alphabetize uses 700-899 lb. Medium and Large Frame #1 feeder steers and 700 -899 lb. Medium and Large Frame #one-ii feeder steers within a 12-land region. The average feeder cattle futures price in July 2021 for commitment in September, October, and November was $160.22, $162.xviii, and $163.43, respectively.

Nebraska Feeder Cattle Basis for 700-899 lb. steers and heifers is calculated as the historical Nebraska monthly cash price minus the monthly nearby CME feeder cattle contract. Effigy ii plots the historical basis for 700-899 lb. feeder cattle in Nebraska. The average historical basis between 2010-2020 for September, Oct, and November are +$5.80, +$v.92, and +$4.95 for steers and -$5.xvi, -$four.62, and -$4.93 for heifers, respectively.

An expected Nebraska local greenbacks toll in September, October, and November can be calculated by historical expected footing plus the feeder cattle futures contract. Thus, the expected boilerplate price for 700-899 lb. feeder cattle in September, October, and November are $166.02, $168.10, and $168.38 for steers and $155.06, $157.56, and $158.50 for heifers, respectively.

Comparing Video Auction Prices to CME Futures

Tabular array two compares the video auction prices and the calculated expected greenbacks price for Nebraska using current futures plus the historical basis. Across all delivery months, prices are very similar for steers. Heifers are currently more heavily discounted on the video auction relative to the futures. This has two potential implications. First, this may propose that the basis in the Fall may be weaker than the historical footing observed. The most negative Nebraska heifer basis in the Fall is -$10 per cwt. Even with a historically weak basis, CME futures would notwithstanding exist larger than prices observed for heifers on the video auction for October and November delivery. 2d, in that location have been very few video transactions for 700-899 lb. heifers. As more cattle are sold at this weight prices are likely to rise. Heifer prices going into the fall volition probable be a combination of both bug – ground will probable be weaker (more than heifers coming to market relative to other locations) and increasing prices as more heifers are sold for Fall 2021 commitment.

---

[1] Cost discounts and premiums include cattle that are categorized as either NHTC, Value Added, Source/Age, Fleshy, Unweaned, Fancy, Spayed, or Separate Loads.

Supporting Tables

Table 1. Video Sale Prices for Steers and Heifers for Delivery in September, Oct, and November - Various Weights

	Weighted Boilerplate Prices ($ per cwt.)
	September	October	November
Steers
400-500	212.17	196.47	199.71
500-600	176.95	180.87	182.38
600-700	-	168.09	169.65
700-800	167.ninety	168.59	169.53
800-900	160.96	160.52	-
Heifers
400-500	173.00	171.46	174.26
500-600	157.65	160.20	160.60
600-700	159.fourscore	152.55	154.13
700-800	160.73	152.22	149.41
800-900	150.87	150.78	-

Source: USDA-AMS (2021)
Notation: "-" implies that no cattle were sold at that given weight, sex, and delivery month

Table 2. Comparison Video Auction Prices to CME Futures Prices

	Weighted Average Prices ($ per cwt.)
	Steers (700-899 lbs.)		Heifers (700-899 lbs.)
	Video Auction	CME Futures	Video Auction	CME Futures
September	167.xc	166.02	160.73	155.06
Oct	168.59	168.10	152.22	157.56
Nov	169.53	168.38	149.41	158.50

Source: CME Group and USDA-AMS (2021)

Supporting Figures

Figure 1. Video Auction Feeder Cattle Prices for Delivery in September – November, North Central Region (Large and Medium Frame, Musculus Grade ane&2). Source: Superior, Northern, and Torrington Video Auctions Reports (2021).

Figure 2. Nebraska 700-899 lb. Steer and Heifer Historical Footing, 2010-2020. Source: USDA-AMS and CME Group (2021).

malpasshavenalwas.blogspot.com

Source: https://beef.unl.edu/beefwatch/2021/what-are-video-auctions-and-cme-futures-telling-us-about-fall-feeder-cattle-prices