The first couple of weeks of July saw more than 450,000 head of cattle sell through the major video sales. These sales are typically looked at as bellwether sales. If that is the case, sales going into the fall will be strong, as expected.

Steer calves weighing 500-600 pounds (lb.) averaged $330 per hundredweight (cwt.), and the heifers brought $295 per cwt., on average. That’s $1,815 for a 550-lb. steer or $1,549 for a 525-lb. heifer. These prices are up roughly 10% compared to the same sales last year.

Premiums for program cattle were largely steady with a year ago to a little softer, averaging about $10 per cwt. On the downside, premiums for G.A.P. (Global Animal Partnership) cattle have softened significantly compared to last year. On the upside, premiums for AngusLink^SM cattle seem to be steady/firm when compared to last year’s historical levels.

Not surprisingly, load lot size and location (freight) continue to play large roles in determining price, but we are seeing more differentiation in prices based on genetics than ever before.

No sign of heifer retention

There has been a lot of talk about expansion and heifer retention, but the percentage of placements going into the feedyard for heifers has not changed, and the historically wide spread that continues between steers and heifers would indicate we are not seeing much of any additional heifer retention at this point.

The price spread between steers and heifers should narrow some as expansion kicks off, and that will be a trend to watch this fall. Moisture conditions, and feed availability, as always, will be big drivers to see how much expansion will occur.

Increasing profits have not triggered widespread heifer retention, in part because these higher prices are encouraging producers to sell. Higher input costs, higher interest rates and higher valuations are just a few of the reasons most experts believe this will be a longer and more extended expansion cycle.

In 2014 and 2015, expansion was rapid, creating a V shape when charting prices. In this cattle cycle, we are expecting expansion to be slower, lengthening the period of higher prices and charting as more of a U.

Things to watch

As we progress through the summer, the market will be watching the corn crop closely. Right now crop conditions are suggesting close to trend-line yields. Long-term weather outlooks continue to raise concerns about the late-summer time frame as we transition into a La Niña phase. Before it is put in the bin, the corn crop has two major hurdles to clear — making it through the pollination stage and harvest itself. Barring any disruptions, corn should be supportive of feeder-calf prices.

The last several years these early video sales have been the highest markets of the year, and most would indicate this will be the case yet again this year. The trend line for feeder-cattle prices is well-established and should still be moving higher the next couple of years. Producers will need to monitor outside macro forces that have the potential to disrupt the current market fundamentals (regional wars, a divisive election, macroeconomic factors affecting beef demand, etc.). Fundamentally, supplies will be tight and growing tighter as we move into the fall.

All in all, the fundamentals of the marketplace are strong, and the industry continues to differentiate cattle based on genetic merit at an increasing rate, driving price spreads within classes of cattle.

Supply chains continue to be aggressive buyers and drivers in the market. They have created additional margins, and additional demand for cattle that will hit their targets or specifications.

Managing risk

By definition, price spreads increase risk. That is why having objective reliable tools like the Genetic Merit Scorecard^SM are growing in acceptance. Not only do they help buyers know what they are buying so they can manage and market them appropriately, but they allow buyers to reduce their risk associated with price differentiation.

In summary, we have never seen more demand or higher premiums for Angus genetics in the feeder-cattle and calf markets. These premiums are providing opportunities for those producers who can describe and document the genetic merit they have created through their investment in Angus genetics.

Give the AngusLink program team a call so we can discuss how AngusLink can help you fully maximize the opportunities being created in our industry.

Editor’s note: Troy Marshall is director of commercial industry relations for the American Angus Association.

Angus Beef Bulletin EXTRA, Vol. 16, No. 8-A