Peel Says Cattlemen Need To Be Patient As Cattle Market Recovers

Cattlemen saw a historically great year for cattle prices in 2014. Returns to cow-calf producers were over $500 per head. That trend looked like it would repeat itself in 2015. The market appeared strong for the first half of the year, then came the cattle market collapse of August, September and early October. Oklahoma State University Extension Livestock Marketing Specialist Dr. Derrell Peel said fundamentally little has changed from 2014 to 2015. Before the market collapse, cattle numbers were fairly tight. The situation was intensified as cattle producers held back females.

 

 

“Those things really haven’t changed,” Peel said. “You know, feedlot placements the last six months or so has actually been significantly down from a year ago. The ones we had, we never seem to move out of the feedlots. That’s what created the problem. But underneath it all, even though feeder supplies are beginning to grow here in the last part of 2015, they’ll grow some more in 2016.”

 

Meanwhile, herd expansion will also continue to take place. Peel said the size of calf crops will begin to moderate for 2015 and 2016 and heifer retention will continue. He said this is going to be a relatively slow process of rebuilding feeder supplies, where supply becomes an issue from a price standpoint.

 

In looking at the price outlook for the remainder of the year, Peel said it’s difficult to know where prices are going. He said the next two to three weeks will be harder to predict than where prices are headed in 2016 or 2017. Right now the market is going through a transition period.

 

“I think the next two weeks are really critical in terms of verifying whether or not we’ve cleaned up our mess right now,” Peel said. “You know, beyond that, there are expectations of a significant rally in prices in the fourth quarter.”

 

Peel said seasonally he would expect a rally in the fourth quarter anyway, but even more so under this situation. He said if the industry can take care of business and move these heavy weight cattle from feedlots to the packing plants, then the last couple of months of 2015 look pretty good. Peel said producers can’t get caught up in what’s happened in the market.

 

“Even with the amount we’ve taken off the prices we’re still at the second highest level ever in terms of expected cow-calf returns,” Peel said.

 

In the short run, Peel looks for a significant rally for feeder cattle and calf prices over the next two to three weeks. Going into mid-November he thinks the market will recover, so he urges producers to be patient in selling their calves. He also predicts cattle prices to stay at favorable levels into 2016 and 2017.