Livestock Marketing Information Center: Seasonality

Matthew Dearsen of South Dakota State University analyzes the market

release date January 17, 2024

LAKEWOOD, Colo. — Seasonality can be relevant throughout the cattle market, including feedlots, various grazing operations, and calf operations. With new year-end data, it seems timely to examine seasonal trends in prices. Most cattle departments have some seasonality in prices due to biology, forage growing season, climate, etc. Therefore, seasonal patterns occur in cash prices. These also tend to be reflected in futures prices when cross-maturity contracts are tested at specific points (such as carry-in in custodial markets). Charts of nearby futures prices also reflect the seasonal patterns observed in spot prices. However, futures prices are generally unbiased and seasonal patterns rarely exist for any particular contract. For example, there is no seasonality in June live cattle futures prices or his September feed cattle futures prices.

Cash prices for feed cattle are seasonally markedly higher from March to May and lowest in September (and sometimes October). This pattern is consistent across southern plains cattle (tracked by LMIC) and northern markets (e.g., Worthing, South Dakota). This trend cannot be ignored. When hedging or negotiating prices, the basis reflects the underlying seasonal pattern for futures prices. For example, Worthing’s basis was very high in May 2023, reflecting the seasonal cash premium compared to June futures prices. On a 2024 basis, in the northern region, it is usually expected that before March and after September it will be negative by 2 to 3 dollars. Basis is also expected to be positive, reaching a peak near $10 (plus) in May. In southern locations, less favorable levels are obtained.

Seasonality in cash prices for feeder cattle is less pronounced. It tends to be lower in February and March before reaching its peak in late summer. Seasonality also varies by region, with peaks in the southern plains occurring in August and September, while peaks in South Dakota tend to occur in July. Seasonality has no clear impact on feed cattle standards that need to be managed or accounted for. South Dakota’s feed cattle basis tends to be about $5 above futures prices in most months of the year (though it remains near $2 in January and February). Evidence in southern locations tends to be more variable and is often negative rather than positive. Differences in location within the base likely reflect differences in quality and transportation rather than seasonal differences.

For South Dakota calves and stockers, the seasonal pattern of spot prices is slightly higher June through August and slightly lower in January and December. The highest prices occur during the summer when sales volumes are very low. In contrast, the Southern Plains is more likely to be slightly higher in March and slightly lower in October. Similar to feeder cows, there is no significant seasonal pattern in calf basis in South Dakota. The average over the past five years has been about $35 above futures, slightly higher in March and slightly lower in October. This seasonality tends to be more pronounced elsewhere in the United States.

Newly updated pricing and benchmark data for South Dakota locations are listed below. Some of the Monthly Cattle Price and Basis Levels (sdstate.edu) sources use LMIC files. Observations for the Southern Plains are based on data from LMICs.

The Market

The cattle market was a mixed bag this week. In cash transactions, fed cattle were lower on a live and clothed cattle basis. Boxed beef was more expensive. Prices for feed cattle were stable for lighter animals and lower for heavier animals. In terms of futures, live cattle were near-high and deferred contracts were solid. Feed cattle futures rose. Cash corn ended the week lower as a combination of last week’s reports resulted in better-than-expected corn supplies.

— Matthew Diersen, Risk and Business Management Specialist, Ness School of Business and Economics, South Dakota State University

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