The fundamentals of cattle markets in 2019 do not currently send a clear higher or lower signal for calf prices this year. Larger supplies but great beef demand have kept calf prices in a pretty close range the past two years. That is still the story in early 2019. An unexpected shift could happen; but droughts, changes in the overall economy, etc., are nearly impossible to predict far into the future with any level of accuracy. But in years where there is not a fundamental push (an example would be the low-supply-driven surge in prices in 2014-2015), market seasonality is often the biggest driver of price changes throughout the year.
Calf prices are dependent upon prices around the country. Feedlot demand for steers and stocker demand for steers are both important drivers of the feeder markets. Also important is the timing of when most cattle are weaned and hit the market – usually during the fall months. If these factors cause prices to behave similarly throughout each year, a seasonal price index can be used to estimate the impact that the time of year can have on cattle prices.
To examine this, we can calculate a seasonal price index that shows how much monthly average prices differ from annual average prices. This is calculated by dividing each month’s average price by the average annual price. Next, the monthly average across the years of data is calculated to obtain an average price index. The price index calculated in this article has a base value of 1. This implies that if a given months price index is 1, the average price in that month is equal to the average annual price. If a monthly index value is 1.05, then the average price in that month is five percent higher than the annual average.
Mississippi steer prices over the past 7 years in Mississippi have followed a seasonal pattern of higher prices in the early Spring months and lower prices in the early Fall. We are approaching the seasonally high months of the year for Mississippi and Southeastern calves. The seasonal lows for 500-800 pound steers usually come in the Fall when the largest number of calves are being sold. For 500-600 pound calves, prices in October are nearly 10 percent lower than the annual average – and about 15 percent lower than March prices, on average. These seasonal patterns are worth watching this year. How high the peak is in the Spring is another piece of information to use when projecting calf prices during the Fall.