Historical Cattle Prices, Long-term Trends, Seasonal Patterns, and Futures Basis at Sioux Falls, South Dakota

Transcription

1 South Dakota State University Open PRAIRIE: Open Public Research Access Institutional Repository and Information Exchange Department of Economics Research Reports Economics Historical Cattle Prices, Long-term Trends, Seasonal Patterns, and Futures Basis at Sioux Falls, South Dakota Dillon Feuz South Dakota State University Follow this and additional works at: Part of the Agricultural Economics Commons Recommended Citation Feuz, Dillon, "Historical Cattle Prices, Long-term Trends, Seasonal Patterns, and Futures Basis at Sioux Falls, South Dakota " (1995). Department of Economics Research Reports. Paper This Article is brought to you for free and open access by the Economics at Open PRAIRIE: Open Public Research Access Institutional Repository and Information Exchange. It has been accepted for inclusion in Department of Economics Research Reports by an authorized administrator of Open PRAIRIE: Open Public Research Access Institutional Repository and Information Exchange. For more information, please contact

2 HISTORICAL CATTLE PRICES, LONG-TERM TRENDS, SEASONAL PAHERNS, AND FUTURES BASIS AT SIOUX FALLS, SOUTH DAKOTA by Dillon M. Feuz Economics Research Report 95-2 April 1995 Dillon M. Feuz is an Associate Professor of Economics, South Dakota State University, Brookings, South Dakota.

3 PREFACE This publication is intended to provide historical cattle price information often needed by researchers, students, agri-business personnel, and cattle producers. The price information was obtained from the USDA, Agricultural Marketing Service, Livestock and Seed Division for the Sioux Falls, South Dakota Market. The work of the USDA recorder stationed at Sioux Falls is gratefully acknowledged. Even though many producers in the state may not sell cattle through the Sioux Falls auction, the price information contained in this publication still is very valuable. Most producers probably know how prices at their local auction compare to those reported at Sioux Falls and so they can make the necessary adjustments to these prices. It is the opinion of this researcher that the price trends, seasonal indexes, and futures basis information on the slaughter cattle probably are more representative of South Dakota markets than are the corresponding numbers for feeder cattle. The Sioux Falls market may not have a sufficient volume of feeder cattle, particularly in some months of the year, to be as representative of the state as a whole as was the case for slaughter cattle.

4 TABLE OF CONTENTS Page # SUMMARY V SLAUGHTER CATTLE PRICES 1 Heifer Price Discount 3 Slaughter Cow Grade Differentials 3 Slaughter Bull Grade Differentials 3 Long Term Trends 3 Monthly Prices and Indexes 5 Slaughter Steer Basis 7 FEEDER CALF PRICES Heifer Discount 18 Long Terra Trends 18 Monthly Prices and Indexes 21 Feeder Steer and Heifer Basis 22 REFERENCES 28

5 LIST OF TABLES Table Page # 1. AVERAGE ANNUAL PRICES OF CHOICE SLAUGHTER STEERS AND HEIFERS, SLAUGHTER COWS, AND SLAUGHTER BULLS AT SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER STEERS, LB., CHOICE 2-4, SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER HEIFERS, LB., CHOICE 2-4, SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, CANNER 1-2, SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, CUTTER 1-2, SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, UTILITY 2-3, SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, COMMERCIAL 2-4, SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 1, LBS., SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 1, LBS., SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 2, LBS., SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 2, LBS., SIOUX FALLS, SOUTH DAKOTA, CHICAGO MERCANTILE EXCHANGE, LIVE CATTLE FUTURES AND THE SIOUX FALLS BASIS FOR SLAUGHTER STEERS AVERAGE ANNUAL PRICES OF FEEDER CATTLE, MEDIUM FRAME NUMBER 1 MUSCLE THICKNESS, SIOUX FALLS, SOUTH DAKOTA, AVERAGE MONTHLY PRICES OF FEEDER STEERS, LB., MEDIUM FRAME NUMBER 1 MUSCLE THICKNESS, SIOUX FALLS, AVERAGE MONTHLY PRICES OF FEEDER STEERS, LB., MEDIUM, FRAME NUMBER 1 MUSCLE THICKNESS, SIOUX FALLS, AVERAGE MONTHLY PRICES OF FEEDER STEERS, LB., MEDIUM FRAME NUMBER 1 MUSCLE THICKNESS, SIOUX FALLS, AVERAGE MONTHLY PRICES OF FEEDER STEERS, LB., MEDIUM FRAME NUMBER 1 MUSCLE THICKNESS, SIOUX FALLS, ii

6 Table Page # 18. AVERAGE MONTHLY PRICES OF FEEDER HEIFERS, LB., MEDIUM FRAME NUMBER 1 MUSCLE THICKNESS, SIOUX FALLS, AVERAGE MONTHLY PRICES OF FEEDER HEIFERS, LB., MEDIUM FRAME NUMBER 1 MUSCLE THICKNESS, SIOUX FALLS, CHICAGO MERCANTILE EXCHANGE FEEDER CATTLE FUTURES AND THE SIOUX FALLS BASIS FOR FEEDER STEERS AND HEIFERS 28 m

7 LIST OF FIGURES Figure Page # 1. HISTORICAL PRICES OF LB. SLAUGHTER STEERS AND UTILITY GRADE SLAUGHTER COWS AT SIOUX FALLS, SOUTH DAKOTA, THE PRICE OF CHOICE, YIELD GRADE 2-4, POUND SLAUGHTER STEERS AT SIOUX FALLS, SOUTH DAKOTA MONTHLY SEASONAL PRICE INDEX FOR SLAUGHTER STEERS, SIOUX FALLS, SOUTH DAKOTA MONTHLY SEASONAL PRICE INDEX FOR SLAUGHTER COWS, UTILITY 2-3, SIOUX FALLS, SOUTH DAKOTA MONTHLY SEASONAL PRICE INDEX OF SLAUGHTER COWS AT SIOUX FALLS, SOUTH DAKOTA MONTHLY SEASONAL INDEX FOR SLAUGHTER BULLS, YIELD GRADE 2, LBS., SIOUX FALLS, SOUTH DAKOTA SIOUX FALLS BASIS FOR CHOICE, YIELD GRADE 2-4 SLAUGHTER STEERS HISTORICAL PRICES OF POUND FEEDER STEERS AT SIOUX FALLS, SOUTH DAKOTA, MONTHLY SEASONAL INDEX FOR FEEDER STEERS AND HEIFERS AND THE CME FEEDER CATTLE FUTURES MONTHLY SEASONAL INDEX FOR LB. FEEDER STEERS AT SIOUX FALLS, SOUTH DAKOTA THE SIOUX FALLS BASIS FOR LB. FEEDER STEERS & HEIFERS, IV

8 SUMMARY Prices for slaughter steers and heifers, slaughter cows and bulls, and feeder steers and heifers are reported and analyzed. Discounts and premiums for various weights and grades, as well as gender, are reported. Each price series is analyzed to determine long term price trends and seasonal patterns. The Sioux Falls basis also is calculated for slaughter steers and heifers and for feeder steers and heifers. The price for slaughter steers, pounds, averaged $73.43 per cwt. over the last five year, Slaughter heifers, pounds, averaged $0.23 per cwt. less than the steers. The discount for heifers compared to steers has been narrowing since the early 1980's when it was often greater than $2.00 per cwt. Commercial grade slaughter cows generally brought a $3.00 per cwt. premium over utility grade cows, and the cutter and canner grades were discounted about $4.50 and $8.50 per cwt. respectively from the utility grade the last five years. been increasing over time. The price differences between the grades has Heavier weight yield grade 1 bulls received the highest prices for slaughter bulls and prices for lighter bulls and yield grade 2 bulls were at $ $4.00 per cwt lower. Slaughter bull prices generally are $10-15 per cwt higher than slaughter cow prices. The average price for pound feeder steers was $ per cwt.. The average price for feeder steers declined with increasing weight to $80.11 per cwt. for pound feeder steers. Feeder heifer prices were discounted from steer prices by over $7.00 per cwt. at the lighter weights and near $4.50 per cwt. at heavier weights. All of the prices exhibited fairly strong upward trends over time, particularly in the 1970's. From 1972 to 1994, pound steer calf prices increased by an average of $2.43 per cwt. per year. Slaughter V

9 steer prices increased $1.83 per cwt. per year and slaughter cow prices increased about $1.19 per cwt. per year from 1970 to Slaughter cow and slaughter bull prices exhibited the strongest seasonal patterns. Prices were seasonally low in the fourth quarter of the year and were seasonally high in the months of March through May, and August and September. This seasonal pattern has changed somewhat in the last ten years. For example, the prices for slaughter steers and heifers for the period have risen sharply the first few months of the year and peaked in April. They then have declined rather rapidly and remained seasonally low from July through October. This is a change from the seasonal pattern of the early 1980's, when prices peaked in May and then gradually declined through the summer to seasonal lows in September and October. Seasonal patterns for feeder cattle prices were not as pronounced as the seasonal patterns for slaughter cattle prices. In some cases there was a tendency for heavier weight feeder prices to be seasonally low during the first few months of the year and be higher in July and August. Due to lack of data in some months, it was difficult to draw many conclusions about the existence of a seasonal pattern for the lightweight feeder cattle prices. The Sioux Falls basis was calculated for both slaughter steers and heifers and for feeder cattle. The monthly average slaughter steer basis varied between -$3.50 and $2.50 per cwt. The basis for feeder steers generally was positive, ranging from $13 per cwt. for pound steers to -$3 per cwt. for pound steers. The basis for feeder heifers ranged from just under $6 per cwt. for pound heifers to -$2.50 per cwt. for pound heifers. The basis patterns all tend to be somewhat seasonal. vi

10 HISTORICAL CATTLE PRICES, LONG-TERH TRENDS, SEASONAL PATTERNS, AND FUTURES BASIS AT SIOUX FALLS, SOUTH DAKOTA, Dillon M. Feuz Cattle prices were relatively high from 1988 through 1993 when fed steer prices averaged over $70 per cwt. However, fed steer prices dropped below $70 per cwt. in 1994 and could remain below $70 per cwt. for the next few years. to the last few years. Feeder calf prices also could be lower compared That could make it difficult for some cow-calf producers to earn a profit. A key to success will be knowing arid controlling production costs and then making wise marketing decisions. Frequently individuals look only at current prices, and sometimes remember last years prices, when making marketing decisions. By analyzing only the most recent prices and current prices, many trends and seasonal price movements are not readily apparent. This publication can be used as a source of longer term price relationships so that researchers, students, ranchers, farm managers, and agricultural lenders will be able to analyze current prices in relation to historical prices and trends. By using both current price and outlook information, as provided by the South Dakota Extension Service and other media sources, and this historical price information better marketing/management strategies can be developed and implemented. SLAUGHTER CATTLE PRICES The annual average prices for slaughter steers, slaughter heifers and various weights and grades of slaughter cows and bulls from 1970 to 1994 are contained in Table 1. Prices for slaughter steers and heifers are for choice, yield grade 2-4 cattle. Slaughter bull prices were reported for different weights and grades prior to 1980, so only prices from 1980 to 1994 are reported here. 1

11 TABLE 1. AVERAGE ANNUAL PRICES OF CHOICE SLAUGHTER STEERS AND HEIFERS, SLAUGHTER COWS, AND SLAUGHTER BULLS AT SIOUX FALLS, SOUTH DAKOTA, (DOLLARS PER CUT.} Slaughter Cows Slaughter Bulls Slaughter Slaughter Commer. Utility Cutter Canner 1000 to to 2100 Year Steers Heifers^ Diff Yld 1 Yld 2 Yld 1 Yld / k/ k/ =' Averages Slaughter heifer weights were for 1988 and 1989 and prior to Bull weights and grades were not consistent prior to Breaking Utility from 1988 through Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota.

12 Heifer Price Discount Traditionally heifers have been sold at a discounted price relative to steers of the same quality. However, that discount as almost disappeared in recent years for slaughter heifers. Throughout the 1970's and early 1980's fed heifer prices averaged $1.80 per cwt. less than fed steer prices. For the last ten years the discount has been $0.91 per cwt. and the most recent five years the discount has been only $0.23 per cwt. Slaughter Cow Grade Differentials The largest price differential, $4.64 per cwt. ($49.44-$44.80) for , occurs between the cutter and breaking utility grades (Table 1). There also is a fairly significant increase between the canner and cutter grades, $4.00 per cwt. ($44.80-$40.80), for the period. Over the long term, , there was little price differential between the commercial and utility grades. However, from , commercial grade cows received a $2.86 per cwt. premium over breaking utility grade cows (Table 1). Slaughter Bull Grade Differentials The heavier, yield grade 1 bulls bring the highest price at the market (Table 1). There is about a $2.50 to $3.50 per cwt. premium for yield grade 1 compared to yield grade 2 bulls ($61.91-$59.38 and $ $59.79). Heavier bulls also sell at about a $0.41 to $1.31 per cwt. premium to lighter bulls ($59.79-$59.38 and $63.22-$61.91). For the last five years, slaughter bull prices have averaged about $10 per cwt. over commercial or utility grade slaughter cow prices. Long Term Trends It is difficult to identify a trend in the slaughter cattle prices by using only the prices in Table 1. It is evident that slaughter steer 3

13 and slaughter heifer prices generally change in the same proportions from year to year. Slaughter cow and slaughter bull price series also tend to exhibit the same patterns, with slaughter cow prices being slightly more variable than slaughter bull prices. Figure 1 contains a plot of the pound slaughter steer prices and a plot of the utility grade slaughter cow prices from 1970 to Several observations can be made from the plots in Figure 1: * There has been a fairly strong upward trend in both price series, $1.83 and a $1.20 per cwt. per year for slaughter steers and slaughter cows respectively; * Both price series have similar patterns with the exception of slaughter cow prices declining much more rapidly following the peak prices of 1973, 1979 and 1990; Slaughter Steers $80- $70- $60- Q. I I $50- $40- $30- Slaughter Cows $20"^ I I I 1970 I I I r" 1990 Mgure 1. HISTORICAL PRICES OF LB SLAUGHTER STEERS AND UTILITY GRADE SLAUGHTER COWS AT SIOUX FALLS, SOUTH DAKOTA,

14 * Both slaughter steer prices and slaughter cow prices declined sharply in Considering where the industry is in the cattle cycle, prices for the next few years likely will be more at the level of the early to mid 1980's, than at the level of the early 1990's. Monthlv Prices and Indexes Monthly and seasonal price variations also can be very important considerations in marketing slaughter cattle. The monthly average prices for the various weights and grades of slaughter steers, heifers, cows, and bulls, as reported at Sioux Falls, are contained in Tables 2 through 11. Monthly price indexes were calculated for each price series using a 12 month moving average technique. This method of calculating monthly indexes removes the influence of cyclical and long term trends.^ The last five year and previous five year average monthly indexes are also presented in Tables 2 through 11. number is a standard deviation. Associated with each monthly index By adding one standard deviation and subtracting one standard deviation from the average, a price index range is established. A monthly index number would be expected to be within that range two out of three years. An index number less than 100 implies that prices are typically lower in that month, than the average annual price. For example, the five year average index number of in July in Table 2 means that the price in July is typically 2.79 percent below the average annual price. By adding and subtracting the standard deviation of 1.71 to the For more detail on the 12 month moving average technique of computing seasonal indexes the reader should consult: Purcell, William D. Agricultural Marketing Systems: Coordination, Cash and Futures Prices. Reston, Virginia: Reston Publishing Company, Inc., 1979.

15 average index number, a range of to is obtained. The July index number should be within that range two out of three years. Slaughter steer and heifer prices generally rise through the first quarter and early part of the second quarter, reaching a peak level in April or May (Figures 2 & 3). Pricing patterns the last five years have resulted in the peak occurring in April. In the and time periods the peak, occurred in May. September has had the lowest average slaughter steer price over the last ten years and July and August have been quite low as well. This is a change from the seasonal pattern of the early 1980's. Both slaughter steer and heifer prices typically strengthen in the fourth quarter, but usually are not as high as the first quarter prices. Slaughter cow prices have the most pronounced seasonal price variation (Figures 4 & 5). Prices have tended to rise rather sharply in the first quarter of the year, then level off somewhat and reach a peak price in May for the last five years. The peak price generally is 2 to 4 percent above the annual average price. The traditionally heavy marketings of cull cows in the fourth quarter of the year puts downward pressure on prices and the November price often is 7 to 8 percent below the annual average. The lower quality canner and cutter grade cows have a more pronounced seasonal pattern than the commercial or utility grade cows. The seasonal pattern has tended to be less pronounced in recent years compared to the time period (Figure 5). Slaughter bull prices the last five years have tended to increase from January through May and then remain near seasonal highs from May through August. Fourth quarter prices typically are below the annual average price (Figure 6). The pattern of the 1990's has been somewhat different than that observed in the 1980's. 6

16 The exstence of a seasonal price movement for slaughter cows and price differences between grades provides the possibility to greatly enhance revenue and profits from prudent marketing of cull cows. For example, a producer who normally sells cull cows in November is selling at a seasonally low price. That producer may be able to feed those cows into February or March and sell them at a seasonally high price. The cull cows fed into February also may move up one or two slaughter grades. As a result the new sale price may be several dollars per cwt. more than if they were sold in the fall months. There are of course, additional costs involved in keeping the cows. However, several researchers have found it profitable to feed cull cows for two or three months (Kearl, 1987a; Shane & Ellingson, 1988) ~ that is, the added revenue as been greater than the additional costs. Slaughter Steer Basis Producers have many types of forward contracts, futures hedges, options, and cash marketing strategies available to them. Evaluation of these strategies requires knowledge of the basis. In this publication, the basis for slaughter steers is calculated as the: SIOUX FALLS CASH PRICE - NEAR-BY LIVE CATTLE FUTURES PRICE where: SIOUX FALLS CASH PRICE is the monthly average price for a particular weight and sex; and, NEAR-BY LIVE CATTLE FUTURE PRICE is the monthly average price for that contract. The live cattle contract is with the Chicago Mercantile Exchange and a par delivery is for 40,000 pounds of USDA estimated Choice grade, live steers weighing between 1,050 and 1,200 pounds at an approved delivery point. The nearest delivery point for South Dakota producers

17 is Sioux City, lowa.^ The contract months for live cattle futures are February, April, June, August, October, and December. The Sioux Falls monthly basis for slaughter steers is reported in Table 12. The average monthly basis from 1985 to 1989 and from is plotted in Figure 7. There are several factors that effect the slaughter cattle basis: the distance to Sioux City, Iowa, the nearest delivery point; timing, e.g., the January versus February basis, the latter being a contract month; the weight of the steers and/or heifers compared to the contract specifications; quality, or perceived quality differences; and gender, in the case of slaughter heifers. All of these factors interact with the expectations of the market participants, and the result is a live cattle futures price and a cash price at Sioux Falls; the difference is the basis. From the data in Table 12 and the bar chart in Figure 7 it is apparent that Sioux Falls generally has a negative slaughter cattle basis, i.e., the monthly average price in Sioux Falls is less than the monthly average live cattle futures price. There also appears to be a seasonal trend to the basis numbers, with a stronger basis during April through July. last ten years. The basis pattern seems to have changed somewhat over the The more recent five year average basis has been stronger from February through May and weaker in the remaining months compared to the average basis. Knowing these historical basis patterns can be very useful for many alternative marketing and risk management strategies. More detail on contract specifications and par deliveries can be obtained from "Futures Trading in Live Cattle: Contract Specifications" Chicago Mercantile Exchange, Chicago, Illinois.

18 TABLE 2. AVERAGE MONTHLY PRICES OF SLAUGHTER STEERS, LB. DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.). CHOICE 2-4, SIOUX FALLS, SOUTH Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (4.31) (1.86) (4.68) (6.10) (5.52) (5.12) (4.23) (4.32) (4.27) (2.93) (5.88) (5.44) (1.84) (1.22) (0.80) (1.37) (2.24) (3.41) (1.17) (2.41) (1.90) (2.37) (2.88) (3.44) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. TABLE 3. AVERAGE MONTHLY PRICES OF SLAUGHTER HEIFERS, LB. DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.).i' CHOICE 2-4, SIOUX FALLS, SOUTH Annual Year JAN FEB MAR APR HAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (4.87) (2.09) (4.99) (5.76) (5.62) (5.44) (4.43) (4.55) (4.25) (3.04) (5.96) (5.56) (2.03) (1.31) (0.74) (1.22) (2.23) (3.20) (1.13) (2.50) (2.01) (2.27) (2.78) (3.33) Source: Slaughter heifer weights were for 1988 and 1989 and prior to USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota.

19 o $80- $78- $76- $74- $72- ^ Si $70- Q. ^ sea- $60 JAN FEB MAR APR MAY JUN JUL AUG SEP GOT NOV DEC s Mgure 2. THE PRICE OF CHOICE, YIELD GRADE 2-4, I100-I300 POUND SLAUGHTER STEERS, AT SIOUX FALLS, SOUTH DAKOTA see- $64- $ > c 0) O 100-0) CL JAN FEB MAR APR MAY JUN JUL AUG SEP COT NOV DEC t Mgure 3. MONTHLY SEASONAL PRICE INDEX FOR SLAUGHTER STEERS, SIOUX FALLS, SOUTH DAKOTA. 10

20 TABLE 4. AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, CANNER 1-2, SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.}. Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (3.41) (1.73) (2.65) (6.36) (4.34) (6.03) (4.53) (4.12) (1.83) (2.20) (2.60) (4.76) (4.56) (8.65) (2.98) (3.61) (2.56) (2.15) (2.30) (3.91) (3.74) (2.12) (1.55) (3.51) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. TABLE 5. AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, CUTTER 1-2 SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.). Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (2.90) (1.50) (2.98) (6.98) (4.46) (5.21) (4.86) (4.10) (2.31) (2.11) (1.65) (4.38) (1.92) (2.54) (2.82) (1.89) (1.53) (2.73) (2.20) (2.65) (1.39) (0.59) (0.30) (2.56) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. 11

21 TABLE 6. AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, UTILITY 2-3, SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.). Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (2.02) (1.07) (1.45) (6.21) (3.34) (5.43) (2.65) (1.19) (2.67) (2.30) (1.97) (4.87) (3.33) (2.09) (1.06) (1.92) (2.09) (0.70) (2.01) (2.06) (0.83) (0.27) (1.88) (3.23) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. TABLE 7. AVERAGE MONTHLY PRICES OF SLAUGHTER COWS, COMMERCIAL 2-4, SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.). Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Annual Average , THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (1.80) (1.96) (2.26) (6.62) (4.20) (5.45) (3.77) (2.27) (3.68) (3.90) (2.16) (3.75) (1.95) (2.27) (0.85) (2.84) (1.91) (1.61) (2.42) (2.77) (4.83) (1.44) (1.18) (2.21) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. 12

22 ) O) I (0 D c 100- < o 98- c 0) O 96- a> Q JAN FEB MAR APR MAY JUN JUL AUG SEP GOT NOV DEC t Mgure 4. MONTHLY SEASONAL INDEX FOR SLAUGHTER COWS, UTILITY 2-3, SIOUX FALLS, SOUTH DAKOTA. 110 d) O) m k_ 0) 15 3 c c < c 0) o L. (D Q JAN FEB MAR APR MAY JUN JUL AUG slp OCT NOV DEC Canner Cutter Utility -B- Commercial Mgure 5. MONTHLY SEASONAL PRICE INDEX OF SLAUGHTER COWS AT SIOUX FALLS, SOUTH DAKOTA,

23 TABLE 8. AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 1, LBS., SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.). Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (1.09) (1.69) (1.59) (2.31) (4.28) (2.05) (3.13) (1.91) (2.29) (2.47) (0.63) (2.53) (0.61) (0.98) (0.49) (1.38) (1.36) (2.33) (2.33) (1.00) (1.11) (1.02) (1.47) (0.57) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. TABLE 9. AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 1, LBS., SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.). Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average ^ THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (1.41) (2.05) (2.36) (3.02) (2.94) (1.26) (2.46) (1.77) (1.67) (2.46) (1.57) (3.14) (1.41) (1.54) (1.76) (2.15) (2.07) (1.74) (1.96) (1.93) (0.99) (1.67) (0.63) (1.21) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. 14

24 TABLE 10. AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 2, LBS., SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CUT.). Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (1.67) (2.30) (1.67) (2.14) (2.89) (1.64) (2.88) (2.87) (3.19) (2.59) (1.84) (3.39) (1.55) (1.60) (1.38) (1.21) (2.43) (2.48) (2.78) (1.90) (1.68) (0.73) (1.87) (1.93) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. TABLE 11. AVERAGE MONTHLY PRICES OF SLAUGHTER BULLS, YIELD GRADE 2, LBS., SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CUT.). Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average THE AVERAGE MONTHLY PRICE INDEX AND THE CORRESPONDING STANDARD DEVIATION IN BRACKETS (1.67) (2.35) (1.50) (3.45) (2.21) (1.83) (2.16) (1.58) (2.10) (2.13) (1.38) (3.31) (1.62) (1.09) (1.52) (1.67) (2.76) (2.56) (2.99) (2.01) (2.14) (1.00) (0.45) (2.44) Source: USDA Agricultural Marketing Service, Livestock and Seed Division, Sioux Falls, South Dakota. 15

25 0) ( ) < mo- (0 D C r 98 < o 96 r (U o 0) ri JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC t Mgure 6. MONTHLY SEASONAL INDEX FOR SLAUGHTER BULLS, YIELD GRADE 2, LBS., SIOUX FALLS, SOUTH DAKOTA. 16

26 TABLE 12. CHICAGO MERCANTILE EXCHANGE, LIVE CATTLE FUTURES AND THE SIOUX FALLS BASIS FOR SLAUGHTER STEERS, CHOICE 2-4, LBS (DOLLARS PER CWT.). Annual Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Average LIVE CATTLE FUTURES SLAUGHTER BASIS AVG AVG Mgure 7. SIOUX FALLS BASIS FOR CHOICE, YIELD GRADE 2-4, SLAUGHTER STEERS. 17

27 FEEDER CALF PRICES Annual average prices for feeder steers and feeder heifers from 1972 to 1994 are presented in Table 13. The prices for 1980 to 1994 are for medium frame, number 1 muscle thickness calves at Sioux Falls, South Dakota. Prices for the period 1972 to 1979 are for choice grade feeders. Kearl (1987b) suggests that the medium frame number 1 muscle thickness grade used today is quite similar to the choice grade of cattle used prior to Therefore, this price series should be fairly uniform. Prices were not reported for the period prior to 1972 because at that time prices were reported on different weight categories, making comparisons more difficult. Heifer Discount The difference between steer and heifer prices are calculated and displayed in Table 13. It is quite apparent that the discount for heifers narrows as weight increases. However, the discount for feeder heifers still is considerably larger than that reported for slaughter heifers. The average discount for pound heifers was $7.19 compared to a discount of $4.54 for pound heifers. In percentage terms, the price of pound heifers was 92.5 percent of the steer price and for pound heifers the price was 94.7 percent of the steer price. This discount has been narrowing since In actual dollars, the average discount for the period was less then that for the period, which was less then that for the period. The percentage discount for has decreased even more, since the actual price level has been increasing. Long Term Trends It is difficult to identify a trend in the feeder calf prices merely by looking at the numbers in Table 13. It is evident that prices 18

28 TABLE 13. AVERAGE ANNUAL PRICES OF FEEDER CATTLE, MEDIUM FRAME NIMBER 1 MUSCLE THICKNESS, SIOUX FALLS, SOUTH DAKOTA LIVESTOCK AUCTION, (DOLLARS PER CWT.).-' Year 400 to 500 poui^ Steer Heifer Diff. 500 to 600 pound Steer Heifer Diff. 600 to 700 pound Steer Heifer Diff. 700 to 800 pound Steer Heifer Diff lb Steer Averages i/ The prices are for choice grade feeders prior to

29 for each different weight class generally move in the same direction by the same proportion. Therefore, a graph of one price series should be fairly representative of all of the feeder calf price series. Figure 8 contains a graph of pound feeder steer prices. In addition to the actual price, the long term trend is plotted. Several implications can be drawn from the graph in Figure 8: * There has been a fairly strong upward trend in prices, $2.43 per cwt. per year; * The higher inflation years of the 1970's had a steeper trend than was the case for the 1980's and early 1990's; * Prices from have remained at a relatively high level compared to historic prices, and this has been a different price pattern than the last two price cycles; $100 $90 $ ) ft t $70- $60- $50- $40- $30- T 1 1 r T" igure 8. HISTORICAL PRICES OF POUND FEEDER STEERS AT SIOUX FALLS, SOUTH DAKOTA,

30 Current feeder cattle prices are below the long term trend, and probably will remain below the trend for the next few years. Cow-calf producers likely will need to carefully evaluate all marketing alternatives if they want to be profitable over the next few years. Monthlv Prices and Indexes As with slaughter cattle, monthly and seasonal price variations can be very important when marketing some weights and grades of feeder calves. For example, Kearl (1987b) found that spring prices for lighter weight feeders, "grass cattle", were seasonally higher in the markets he analyzed: Montana. Torrington, Wyoming, Greeley, Colorado, and Billings, The Sioux Falls average monthly prices for various weights of feeder steers and heifers for the period 1985 to 1994 are presented in Tables Monthly indexes were created for each feeder cattle price series using the same 12 month moving average technique that was used with the slaughter cattle prices. The , the , and the average monthly indexes also are presented in Tables It is difficult to evaluate the seasonality of any product if prices are not reported for every month of the year. for pound and pound feeder steers. That is the case Therefore, the monthly seasonal index values for these tables could be biased by the lack of data for some months. The pound feeder steers, the pound and the pound feeder heifers all have a fairly similar seasonal pattern. The pound steers are at a seasonal high from August through October, the pound heifers are at a seasonal high from July through September, and the pound heifers are at a seasonal high in July and August. All of these classes of feeder cattle could be expected to 21