While spring is usually the high point for calf prices, 2022 marks the third year in a row that something significant has taken some steam off the markets. A global pandemic affected feeder cattle prices in 2020 and prevented our calf market from reaching expected levels. Some of them spilled over into 2021 as well, combined with higher grain prices. As we move into the spring of 2022, we have implications for the war in Ukraine, which is affecting the market in many ways.
Rising feed costs, concerns over domestic demand from higher fuel prices, increased transportation costs, and many other factors are affecting cattle prices as you are reading this. Markets have been trying to price in these uncertainties for the past few weeks, which has led to a lot of volatility. The market has generally corrected last week, as can be seen in the table below. But, volatility is likely to stay with us as things continue to evolve and the market processes changes that matter to animal values.
In the spring, calf markets are primarily driven by fall feeder cattle futures and are partially untouched by feed price effects because many calves are kept in grazing programmes. As I write this on March 21st, fall feeder cattle futures are down $3-5 per cwt since mid-February. While this certainly affected their value this spring, it is not enough to offset the seasonal improvement typically seen at this time of year. Rather, it only limits the range of running the calf market. Unlike calves, hay does not buffer the effects of feed price on heavy feeders because they will be kept on full feed when sold. Additionally, they will be harvested in the fall and deferred live cattle futures have also plummeted in recent weeks. Therefore, we have seen a greater impact on heavy feeder cattle prices than on calf prices.
As bleak as the market situation is, the basics this spring are much better than either of the previous two springs. While price expectations for 2022 have been lowered over the past few weeks, it is worth noting that prices are now much higher than they were in spring 2021. The feeder cattle and calf markets that we track have grown by 13-14%, on average, from a year ago. Boxed beef prices have increased by a similar percentage and cattle prices have increased by 22% since 2021. This is significant and the basic picture is likely to intensify further throughout the year. Heifer retention was down to start the year, painting a picture of shepherds declining again in 2022. And, drought conditions persist in most parts of the country. If this trend continues, it is likely that additional cow rearing will become necessary throughout the year.
Source: University of Kentucky, who is solely responsible for the information provided and wholly owned by the source. Informa Business Media and all of its subsidiaries are not responsible for any material contained in this information asset.