| Cattle Price Volatility |
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Page 1 of 4 Market Advisor: Will 2007 Cattle Price Volatility Continue in 2008?A major factor that will continue to affect calf and yearling prices is the price of corn.
NDSU Extension Service Cattle price volatility will continue in 2008. However, each market class of cattle has unique fundamental factors that will affect the price level and the degree of volatility. A major factor that will continue to affect calf and yearling prices is the price of corn. Cash corn prices in the northern Plains averaged about $1.20 per bushel higher in 2007 ($3.50) than 2006 ($2.30). A rule of thumb is that a 10-cent-per-bushel change in corn prices causes a $1-per-hundredweight (cwt) change in the opposite direction in feeder calf prices. Corn prices experienced much volatility in 2007 and may be even more volatile in 2008. Increasing demand for corn for ethanol production and the competition for planted acres from soybeans, wheat and other crops is fueling price swings. 2007 corn prices started the year at about $3.35 per bushel, increased 75 cents to $4.10 by the end of February, decreased 75 cents back to $3.35 by mid-May and then went back up to $4.10 by mid-July. A decline of $1.10 per bushel to $3 occurred by mid-September, but prices went up to $3.45 by the end of September and then back down to $3 early in October. From the harvest lows in October to the end of December, prices rallied $1.25 per bushel to close the year sharply higher at $4.25. Planted acres of corn increased from 78.3 million acres in 2006 to 93.6 million in 2007. However, with the relatively high current prices for wheat and soybeans, corn acreage is expected to decline in 2008. As reports about expected plantings and weather conditions in the Corn Belt, as well as other countries, are released, the grain and oilseed markets will be volatile. The USDA Prospective Plantings report will be released on March 31, but several private forecasts will come out before that. |
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