- Pat Kirk Angus
Learn How to Interpret and Predict the Live Cattle Market
Updated: Apr 8, 2022
“I don’t know if we can keep doing this for what we’re making.” I’m sure you’ve heard cattle farmers say something like this or maybe even said it yourself.
The truth is, when it comes to cattle farming, the live cattle prices can make or break us. They mean the difference between enjoying your work and worrying whether your efforts are actually worth it - the difference between a comfortable life providing for your family and living penny to penny. Live cattle market prices determine whether or not you can continue raising cattle.
If you want to make more money cattle farming, it's important to understand how the live cattle market works so that you can sell your cattle at just the right time. In this article we give cattle market facts to help you understand supply and demand factors influencing the market, predict the best time to sell your cattle for the most money, and understand cattle market reports.
Calculating One Hundredweight
If you are familiar with cattle sale prices and hundredweight calculations, you may want to skip this part, and go straight to the factors that influence your cattle market. But if you're just learning how the cattle markets works, this is for you.
You need to know how to read cattle prices at the sale barn and on cattle market reports, like the we link to below, because this knowledge is the foundation to how cattle farmers communicate the value of cattle. Without this knowledge, you'll probably be like I was at my first cattle sale - bewildered.
Usually, cattle prices are listed in terms of the dollars per 100 pounds of animal. In the cattle world, this is called the price per hundredweight. When you understand how to calculate price per hundredweight, you'll be able to read live cattle market reports. You'll also be able to compare market price fluctuations for accurately predicting the best time for selling your cattle for the most money.
Calculating Cattle Price Per Hundredweight
A simple equation to help you find the price per hundredweight of cattle is to first take the total weight of the cattle divided by 100. Then use this number you got, the quotient, to divide the total you made at the sale. The live market equation can be represented as follows:
Price per hundredweight = total price / (total weight / 100)
Let's dive into understanding how to calculate price per hundredweight with an example. Let's say you sold an 800-pound steer and made $920 total for the steer. If you want to figure out how much you made in terms of hundredweight. First divide the total weight (800 lbs.) by 100. This gives you eight. Then divide your total profit of $920 by eight, giving you 115. $115 is the total per hundredweight you made from your steer.
Calculating Total Price
You can easily flip our cattle pricing equation to show the total you made from a sale. Simply, divide the total weight of your cattle by 100 as you did before, and multiply your answer by the hundredweight price. Our example would look like this: (800/100) x 115 = 920.
Whether you’re trying to figure out how much you made in total or per hundredweight, it’s important to remember that a live-weight cattle market graphs and cattle sale pricing are usually displayed in terms of price per hundredweight.
Understanding a Cattle Market Report
Once you understand hundredweight calculations, there is one tool you'll want to understand before diving into factors influencing the cattle market - the cattle market graph.
Most live-weight market graphs work similarly to the one from tradingeconomics.com, but we like this one because it lists historical live cattle prices for over forty years and gives a month-to-month comparison of cattle prices. Because the graph lists a wide range of live cattle price history, we can more easily analyze what variables influence the ebbs and flows in the live cattle market.
The x axis (the horizontal line) represents the market price per hundredweight, and the y axis (the vertical line) represents the date. To find the market price for any given date simply hover over the date you’re interested in and the price per hundredweight corresponding to that date will show at the top, left of the graph. It’s also interesting to note whether the market price went up or down shown at the top, left of the graph as well.
Why is it important to be able to read cattle market reports? The biggest reason you should understand and even study the live cattle market is because it can help you predict market ebbs and flows in relation to seasonal trends and variations to these trends. In other words, a good understanding of the live-weight cattle market can tell you when would be best to sell your cattle for the highest price.
What Influences the Cattle Market
Everything impacting the live cattle market falls into two categories: supply and demand. You’ve probably heard of this as the balance between how much people need and how much exists to meet that need, but do you know what it means in terms of cattle sale prices?
Let’s find out.
Supply Factors Influencing the Live Cattle Market
Seasonal harvest trends influence the live cattle market. According to the KRose Company (a cattle marketing expert) most of the beef produced in America is harvested in the fall, and “a majority of beef supply comes within a 6-week period.” Because there are not enough people buying beef in proportion to the supply produced from the harvest influx, live-weight prices drop.
You should normally see this drop reflected on the Trading Economics graph. Whenever a seasonal beef harvest increases past the demand, the hundredweight live market price decreases. Obviously, when the trends reverse and demand is high with a low supply, market prices for cattle increase. Harvest trends influence what kind of a profit you can get for your cattle at sale.
If you want to make more for your cattle, it’s important to study the harvest trends, and try to sell when there is not already an influx of supply going to market.
Every farmer struggles with weather. Dry heat causes lack of fodder, increased feed costs, and dead cattle. Cold is hard on all animals, especially newborn calves. Drought forces us to decide whether to sell out early or try to wait for a break in the weather. Then there’s good weather with plenty of food for the cattle and enough to get through winter without concern. When nice weather comes our way, there's good growing conditions for cattle to put more energy towards gaining weight rather than fighting the elements.
Because weather dictates the quantity and quality of cattle supplied to consumers, it impacts the live cattle prices as well.
For example, if you experienced a year of drought, you may have less feed options and could be forced to decide whether or not you need to sell off some less productive cows to lighten the load on your pasture lands. Because other farmers are probably doing the same thing, creating an influx of supply in the market and because the cows you're seeing are not the type of beef people are willing to pay more for, you probably won't make much.
If you'd like to learn more about how winter weather effects the cattle market, check out this article.
Obviously, weather makes a big difference when it comes to live market prices. Cattle farmers are at the mercies of the Lord as Pat Kirk was in the winter of 2021.
Unfortunately, farming isn’t simple. As international politics, wars, and other social factors come into play, the cattle market is almost always impacted. One change causes another.
Think back to 2013, for example. When a cow packing plant closed down in Quebec Canada, dairy cows were shipped to the US for processing instead. Guess what that did to the supply of beef? You guessed it. The increase of cows being butchered in the US naturally inflated our supply and drove the live market price for beef cattle lower than before.
An international factor impacting the US cattle market, according to the KRose Company, is cross-national shipping trends. Usually, cattle are shipped into the US in larger quantities from late October to early November. Because the supply of cattle increases during late fall, live cattle prices fall.
As you can see, many factors play into the supply side of the cattle market, from things on the farm like the prevalence of disease and quality of feed to outside factors like imported cattle and the weather’s influence. The supply of beef cattle going to sale is constantly influenced. It is these supply side factors that play a major role in how much you can get for your cattle at auction.
Here’s the principle to remember: the more the supply overshoots or under meets the demand, the less or more respectively you can get for your live cattle at market.
Demand for Beef
How much people want beef - or in other words, how much of a demand there is for it - affects the live-weight cattle market too. Demand is the driving force. Obviously, your cattle are no good if no one wants them, right?
Demand can be divided into two main areas: processor’s demand and consumer’s demand, and each is highly influenced by a number of factors.
As you might have guessed, packing plants only want to buy beef cattle from you if they believe that customers are buying beef too. So, overall, consumers support the whole cattle market. Nevertheless, demand from any source is important for making up live cattle prices we get at sale.
Beef Packing Plants
Live-weight beef prices are influenced by what goes on at packing plants.
Employment is big here. When employees stop working because of strike or sickness, less meat can be bought and processed, forcing sale prices to drop.
In addition, investors, outside markets, and consumer purchasing trends impact packers’ ability to get paid and therefore their desire to purchase from you. According to one article, from 2002 to 2012 “the average slaughter rate during the second half of the year increases by nearly a half percentage point compared to the first half of the year." Do you think beef packers pay attention to trends like these? They sure do! And that translates into sale barn prices for you.
Let me give you one more example. On August 9th, 2016 a Tyson packing plant in Holcombe, Kansas caught fire. Since the plant was unable to process beef, farmers were forced to pay more and travel farther to get their meat harvested. Stephen Koontz, Colorado State University economist, explained that “The bottom line is the additional freight costs comes off the side of the live cattle, leaving producers with the tab." With less capacity to process meat and farther distances to travel to get those animals processed, the live-weight cattle market dropped over $20 from August 8th to October 10th.
All that to say, beef packing plants have a large role to play in determining live cattle market prices.
Consumer Demand for Beef
Finally, we’ve arrived upon arguably the biggest factor influencing your live-weight cattle market prices: consumer demand. Restaurants, schools, and individuals supply the beef demand that can either make or break your operation. If the demand reflects the supply of beef cattle being sold, the market will balance in equilibrium. If the demand goes up, the cattle market price will increase. If demand decreases, so will the market price.
Let’s look at a few factors that influence consumer demand for beef.
Economic stability influences the live-weight cattle market. How? Interestingly, the consumer’s view of the economy and the direction it is projected to go, whether they know it or not, causes purchasers to change their buying habits.
National security, employment rates, cost of living, and the prevalence of free trade are a few economic factors that, when stable, create a healthy live cattle market.
Take unemployment as an example. When unemployment rates increase, the live cattle market historically sees a drop. As we saw with unemployment during covid, many people may not be as willing to part with their money in exchange for beef, a relatively higher priced protein source. The live-weight cattle market saw the effect. In April 2020, the market price for live weight cattle was $85.33 per hundredweight, the lowest it had been since November 2009.
Consumer confidence in the economy has a huge role to play in the price you can get for your cattle at market.
Social Happenings - the Human Factor
Similar to consumers’ opinion of the economic landscape are other social perspectives.
Some of these human factors show up in yearly trends. For example, according to market watcher Brad Kooima, as summer approaches each year and we near Mother’s Day, specifically, the demand for beef increases in the US. More time outdoors grilling and in social interactions causes a greater demand for beef and higher live cattle prices. Fall and the approaching holiday season causes market prices to increase as well.
Remember, consumers drive this market.
Is the seasonality of society the only way that human factors influence the market? Nope. Both the influence of personal social perspectives - like hopes and fears - and the influence of social events can occur outside of normal social trends.
One example of this is the market changes of 2020 when we had hopes of a vaccine for covid. The market rose a bit during this time, according to Brad Kooima.
Think about some other variables. If we had an increase in weddings or graduations in a particular year, what would that do to the market? Or what if there was a pro-beef health study that became popular throughout the US? These would naturally increase the social demand for beef and drive the live cattle market higher.
Conversely, what would happen if the opposite occurred - if we had less events and more anti-beef publications? You guessed it. Prices would drop.
As in all businesses, the human factor is the main cause behind the cattleman's success. It cannot be overlooked.
Where do we go from here?
With the ability to calculate hundredweights and read a live-weight cattle market graph, as well as a foundational understanding of the supply and demand factors that affect the market, you should be able to track the trends, understand what causes them, and make adjustments for more successful cattle sales.
God bless your efforts!