Elevator Address

With much of cow-calf country getting slammed with snow on the week before most cattlemen ship out their calves, one sale barn owner summarized the year most accurately, saying, "This year has been like being a one-legged man in a soccer kick-out contest!" Brutalized by the early 2019 winter, then nearly washed away with the spring floods only to welcome lower calf prices in the early summer sales, then to find a volatile fat cattle market come August and September -- 2019 has been a year cattlemen don't mind forgetting and pray that they make it through.

As the calendar approaches the third week of October, cattle trucks are running rapid, up and down the major interstates and country roads. The snow storm that hovered over parts of the northern U.S. couldn't have come at a worse time for cow-calf producers. Cattlemen in the North experience great difficulties getting trucks in and out of loading facilities, with little room for trucks to turn around, and drivers are grumbling when they have to roll around in the mud to put on their chains. Meanwhile, these anxious cattlemen are chomping at the bit because they're burning daylight and it's a long haul for freshly weaned calves to start the day in North Dakota and end up in a growing yard in Colorado.

Regardless of what pre-conditioning vaccination program is used, reckless weather can break down calves quicker than most can treat the problem, and with feedlots being in the financial pinch they are this year, pouring money into calves for sickness isn't a game they want to play, but they know it's better than losing them all together.

To be frank, most cattlemen are simply trying to make it through this year's weaning. They knowthe banks have been understanding so far but are about at the end of their rope. Many producers passed on the early summer sales this year and chose to take a gamble with the autumn market. Some folks turned out alright by contracting their calves to country buyers, but those who waited around too long wished they had accepted those initial bids.

Last week (week ended 10/11/19) sale barns held their own and calves were called anywhere from unevenly steady to instances of $5.00 higher. The yearling market has been hot and will continue to ring the bell hard with green yearlings becoming harder and harder to come by. Calf interest has picked up some, helped by the autumn-run making fat cattle prices stronger, and we know psychology plays into it far more than we'd all like to admit.

Many project the market is due for some sort of correction. Not because live (aka fat) cattle aren't worth current prices, but because in the last 36 days there has been a significant $17.60 rally. The market could either level out and trade merely sideways for the next couple of weeks before sound support is found in current prices or it could subside to lower prices for a while until another rally is built. Nevertheless, packers and feedlots alike know $111.00 isn't too much for live cattle. Exactly a year ago, on Oct. 15, 2018, live cattle traded for $113.37 and on Oct. 16, 2017, live cattle sold for $111.72. With great gains there is great volatility and that's where the problem lies.

Live cattle and feeder cattle prices typically walk hand in hand. There are obviously times of the year when the two markets vary in supply and demand, but overall the two markets usually feed off one another. Etching into the autumn feeder cattle rally has been somewhat optimistic because live cattle prices have been on the upward scale. It comes as no surprise that once the autumn run really gets underway, feeder cattle prices will weaken as feeders are a dime a dozen and buyers don't have to work too hard at getting a good deal. But if the live cattle market undergoes the much-anticipated correction, feeder cattle prices could weaken much more.

To beat getting stuck in the trench of an over-supplied market, some cattlemen have their eyes on the January-February 2020 feeder cattle market. Typically, this is a time where fewer feeders are sold and there is usually a two- to three-week window after the first of the year where feeder prices are quite shiny. It takes a little more planning to be able to carry those calves over -- they need somewhere to land, additional feed through the beginning winter months, someone willing to be choring the calves daily and plenty of prayers that old man winter doesn't come too early.

Nevertheless, 2019 hasn't been a year where producers with wary hearts survive, and though one would think the cow-calf sector is long overdue for catching a break -- this year's fall feeder cattle market doesn't look like it will be throwing any bones their way. Grab your hat and tuck your chin cattlemen because the gate to the fall feeder cattle market has opened.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

(BE/CZ)

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