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Fed prices leading cattle markets to record levels

STILLWATER, OK – The daily 5-Market negotiated cash fed cattle price reported on Thursday, April 6, 2023, by the USDA Agricultural Marketing Service, was $172.33/cwt., a new record daily fed cattle price.  This was followed on Friday with a price of $175.87/cwt.  The previous record daily price was $172.08/cwt. on November 26, 2014.

Where do fed prices go from here?  In a steady market, fed prices would typically peak seasonally about now and move lower through the third quarter before increasing to the end of the year.  This sort of typical pattern is currently priced into the Live Futures with futures prices decreasing from the nearby April (currently just over $171/cwt.) to June (about $163/cwt.) and August ($162/cwt.) before increasing in the October contract ($166/cwt.) and December ($171/cwt.).  At this time, Live Futures prices do not exceed nearby levels until the February 2024 contract (currently $174/cwt.).

Will fed prices follow this typical seasonal pattern this year?  Figure 1 suggests maybe not.  In 2021 and 2022, the strong uptrend in fed prices offset seasonal tendencies, with prices moving continually higher.  There is good reason to expect the uptrend to continue in 2023. The seasonality priced into the markets now may fade as markets trend higher going forward.

 Feedlot inventories are just beginning to fall with ever tighter feeder cattle supplies and are likely to continue decreasing at least through 2023, pushing fed prices higher.  Fed prices may increase more slowly or plateau briefly in the summer months but are not likely to have a typical seasonal decline going forward.

Feeder cattle prices have not yet reached record levels but are advancing to surpass previous price peaks.  Montana combined auction prices reported by USDA for 550–600-pound, Medium/Large No. 1 steer prices for the week ending April 7 were $252.19/cwt.  For the heavier feeder cattle, 850-900 pound steer prices averaged $187.22/cwt. Feeder cattle prices are currently about 80 percent of the record price levels in late 2014 and will undoubtedly exceed previous high prices at some point in the coming months.

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