Tennessee Feeder Cattle Prices Influenced by COVID-19

Feeder cattle prices are driven by supply and demand for live cattle (i.e., finished cattle) that are in turn driven by supply and demand for beef. Supply and demand in the cattle and beef industries change seasonally, resulting in seasonal price changes for feeder cattle, finished cattle and beef. For example, on the cattle side, many cow-calf producers calve in late winter and early spring months (February and March) and market cattle in the fall (October and November). The increased supply of lower-weighted calves (i.e., less than 600 pounds) induces lower prices in the fall, whereas in the spring (March or April), there is a lower supply of animals under 600 pounds that typically sell at higher prices. Additionally, the timing of calving greatly influences when an animal will enter the feedlot and thereby when it will be harvested. From a beef demand perspective, the greatest demand for beef generally occurs during the summer grilling months, and the softest demand occurs during the winter months. Thus, these factors also seasonally influence feeder cattle prices. Outside of supply and demand for beef, feeder cattle prices are regularly influenced by changes in feed prices, as feed costs are a large component of feedlot production costs. However, there are occasions when other external (exogenous) shocks influence feeder cattle prices, such as bovine spongiform encephalopathy (BSE) in 2003, drought in 2011 and 2012, and the Tyson beef packing facility fire in 2019. Each of these external shocks affected the typical supply and demand of finished cattle, which also transmitted to feeder cattle prices. Though these shocks were exogenous to the market, they were primarily isolated to the cattle industry or agricultural production industries; that is, they did not involve the broader United States population. Coronavirus (COVID-19) is another external shock influencing cattle prices in early 2020. The difference between COVID-19 and the external shocks discussed above is that coronavirus influenced most national and international markets, not just beef cattle. The purpose of this publication is to illustrate how Tennessee feeder cattle prices were impacted by COVID-19 in the first four months of 2020, compared to those same four months historically (based on data for cattle sold through Tennessee auction markets reported by USDA-AMS).