Dr. Andrew P Griffith, University of Tennessee
The prices for nearly every weight class of calves and feeder cattle are simply silly. The buyers of these cattle recognize that the sudden ascension of cattle prices is not a good thing. They know they cannot make any money if they do not own cattle, but they also know prices at this level means they can lose a lot of money in a short time. Newton’s third law states that for every action there is an equal and opposite reaction. The sudden increase in prices will eventually be met with a decline in prices.
The unfortunate part of that statement is that in the cattle price world that could result in prices declining more quickly than they increased. It could also result in cattle prices staying lower for a longer period of time than when prices increased, which is exactly what was experienced in the last price cycle. This should not be met with fear but with the thought that managing price risk has become more important today than the past few years as it relates to the feeder cattle market.
At the same time, slaughter cow and bull prices are also holding pace with other classes of cattle. Slaughter cow prices are averaging between $100 and $110 per hundredweight while slaughter bull prices are in the $125 to $135 per hundred-weight range. These are extraordinary salvage values for cows and bulls that are no longer useful in the breeding herd. Market prices will continue to evolve the next several weeks and months, but prices moderating a little bit would not be a bad thing for the industry.
