By DOUG SCHMITZ

Iowa Correspondent

KNOXVILLE, Tenn. — Despite the recent dip in feeder cattle prices, they remain strong compared to 2016 figures, according to Andrew Griffith, University of Tennessee extension agricultural economist.

“Cash prices in Tennessee for steers the same week in November 2016 were $25 to $30 per cwt. lower, compared to current prices,” he said. “January is now the nearby contract for feeder cattle and the closing price on Friday is more than $8 lower than the contract high. However, it is difficult to speak too negatively about a feeder cattle price that exceeds $153 when one thinks back to prices one year ago.”

Griffith said the January feeder cattle futures contract has fairly strong support just above the $148 price point, as it has been trading above this mark since the third week of September.

“The risk of January feeder cattle falling below $148 is relatively small at this point, but the chances of it exceeding the $162 mark again may not be that likely either,” he explained.

“The current situation may offer highly leveraged producers the opportunity to lock in a profit at a minimal cost. For producers that can afford to carry the market risk, it may be beneficial to sit tight and keep a close eye on the market.”

At the same time, U.S. producers are eyeing the first-quarter feeder cattle market, thinking about early spring calf prices, he said. “The strong feeder cattle market should lead to a strong calf market in late March and early April. Another aspect of the market to point out is the January feeder cattle contract has the highest price of all contracts being traded.”

Griffith said this will be followed by the August 2018 contract, which is 50 cents back of January; however, all contracts through September 2018 are within a $2.50 trading range.

“There are several thoughts concerning the tight trading range, but the thought that is most likely to summarize the tight range is that there is a lot of uncertainty to the number of animals coming to the market,” he said. “The price outlook the next several months appear favorable for cow-calf and stocker producers. Producers are encouraged to manage profits wisely, as prices will soften in coming years.”

He said fed cattle prices were mostly steady to slightly lower in early November, with cash prices in the $118 per cwt. range – about $7 higher than a year ago. Fed cattle traded steady to $1 lower, compared to early November on a live basis, with prices on a live basis mainly $118-$119, while dressed prices were mainly $188-$189.

“A year ago, prices were $111.06 live and $172.91 dressed,” he said. “Most feedlot managers appeared satisfied to only move the cattle necessary, as they expect prices to maintain the status quo or strengthen in December. It will be difficult for cattle feeders to gain enough leverage the next few weeks to push prices higher than where they have already been in the fourth quarter.”

According to the Livestock Marketing Center in Lakewood, Colo., the nation’s top five states that raise cattle and calves as of Jan. 1, 2017, are, in order: Texas, 12.3 million head; Nebraska, 6.45 million; Kansas, 6.4 million; California, 5.15 million; and Oklahoma, 5 million.

Moreover, the nation’s top five states for cattle in feedlots with capacity more than 1,000 head as of Jan. 1 are: Texas, 2.42 million; Nebraska, 2.37 million; Kansas, 2.17 million; Colorado, 900,000; and Iowa, 600,000.

Dave Miller, Iowa Farm Bureau Federation director of research and commodity services, said there were ample supplies of corn existing in many areas of the country, which contributed to continued pressure on corn futures.

“When combined with relatively wide local cash basis levels,” he said, “it makes ‘walking corn off the farm’ an attractive option for many feeders. Add to this a fed cattle market that is trading $7 higher than a year ago and it supports feeder cattle prices substantially higher than a year ago.

“Continued full-employment conditions in the U.S. labor markets, record stock market values and improved growth in the U.S. economy all bode well for fed cattle values and feeder cattle to continue with positive values, compared to year-ago values.”

Derrell Peel, Oklahoma State University extension livestock marketing specialist in Stillwater, said earlier in the fall, feedlots were losing some money and appeared to be paying too much for feeder cattle and thus jeopardizing feedlot margins for the coming months.

“However, cash fed cattle prices have improved recently, increasing current margins,” he said. “Cost of gain is expected to stay very favorable for the foreseeable future. Moreover, live cattle futures prices have pushed higher recently to levels that come close to supporting current feeder prices for cattle finishing through next April.

“As with feeder futures, the live cattle futures pricing opportunity may be short-lived.”

In the end, Peel said strong demand is what makes all of this possible. “Boxed beef prices have recovered about $10 per cwt. from the early fall lows. Retail beef prices are holding close to year-ago levels, despite a 4 percent increase in beef production in 2017.

“Demand is strong in both domestic and international markets, with year-to-date exports up over 14 percent,” he added. “Strong demand is the key to allowing all sectors of the industry to have decent margins simultaneously, and will be the key as beef production continues to grow in 2018.”