By DOUG SCHMITZ

Iowa Correspondent

KNOXVILLE, Tenn. — Price volatility continues to strain the feeder cattle market, according to Andrew Griffith, University of Tennessee agricultural economist, adding the calf and feeder cattle markets are “a tale of two stories.”

“It is more about the story of the futures market and a story of the local cash market,” he said. “The futures market is where much of the uncertainty and volatility has been present the past couple of weeks.

“Looking at March feeder cattle as an example, the futures market closed $2.48 lower on January 25 than on January 24, before it closed $2.80 higher the next day.”

The local auction markets are a different story, “but they should ease some of the angst for those looking to market cattle in the near term. There has been less volatility in cash markets and a more steady hand as stocker operators and feedlot managers continue to be active participants in the calf and feeder cattle markets.”

Based on Tennessee weekly auction markets, Griffith said steers and heifers were steady to $5 higher compared to late January, with most of the interest in lighter-weight cattle that will be ready for spring grass as soon as it appears.

Dave Miller, Iowa Farm Bureau Federation director of research and commodity services, said three primary factors have contributed to recent volatility in feeder cattle markets.

“USDA reports where the January Cattle Inventory report indicated a calf count that came in slightly below pre-report expectations and then a Cattle on Feed report that was considered bearish due to higher-than-expected placements of cattle into feedlots,” he said.

A second contributor to recent volatility was the sell-off in the U.S. stock markets. “While this has no immediate bearing on short-term beef supply and demand conditions, market participants were re-assessing future beef demand and beef pricing that could occur if the 1,000-point declines in the stock market continued.

“As the stock market correction picked up steam, the sell-off in feeder cattle prices also accelerated,” he added. “As the stock market found a bottom and began to recover, so did feeder cattle prices.”

Miller said the third factor adding some volatility to feeder cattle prices is a strengthening of grain and soybean prices due to drought concerns. “Corn prices are near a six-month high and have rallied more than 25 cents per bushel since late January,” he explained. “Higher corn prices could put pressure on feeder cattle prices.”

In the meantime, Griffith said, the feeder cattle market remains strong and should continue strong in the coming months. In fact, the Jan. 26 USDA Cattle on Feed report, he said, “once again demonstrated large placements of lighter-weight cattle.

“Placements of feeder cattle into feedlots the last four months of 2017 were 9.7 percent, or 747,000 head, higher than the same months in 2016,” he said. “Placements of cattle weighing less than 700 pounds over this time period were up 11.9 percent, or 430,000 head.”

Moreover, he said the increase in placements for lightweight cattle likely means there will not be as many coming off winter annuals in the March-May time period.

“The increased placements of lighter-weight cattle will likely increase beef production slightly earlier than normal, but it should offer opportunities for feeder cattle being marketed in the spring months, as there will not be as many available as once expected.”