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Larry Schnell, managing partner of Stockmen's Livestock Exchange in Dickinson, N.D., on Oct. 24, 2017, auctions off calves at Stockmen's west barn. (Jenny Schlecht/Agweek)

Prices strong at holiday cow sales

At Hub City Livestock's Dec. 30 cow sale in Aberdeen, S.D., a group of 3-year-old bred cows brought $2,030 per head. The day before, at Stockmen's Livestock Exchange in Dickinson, N.D., a set of 4-year-old cows brought $2,050 and a group of bred heifers brought $2,150.

It's a positive sign for areas of the region that were hit hard by summer drought, but representatives of the barns say it doesn't necessarily mean that ranchers who sold down are buying back.

Steve Hellwig, one of the owners of Hub City Livestock, says his barn's sale was on-par with past end-of-the-year sales at the facility.

"The older cows, the old broken-mouth cows, were a little higher than we expected," he says.

Larry Schnell, managing partner of Stockmen's Livestock, says he was not expecting the prices yielded at his barn's sale; prior to the sale, he thought some cows could bring $1,900.

"In all honesty, our stock cow sales from Thanksgiving through December, each of them was $50 to $100 higher than the previous," he says.

The strength of the late December sales might have been, in part, due to people looking to spend a little money for tax purposes before the calendar turned over, Hellwig and Schnell say. For that reason, Schnell doesn't know whether anyone should expect those prices at upcoming sales.

"We'll just have to see how much of that was tax and how much of that was the cattle market," he says.

But there were other reasons for the strength.

Hellwig and Schnell both say the quality of cattle on the auction block was strong. In Aberdeen, that meant the regulars were buying.

"It was all local producers here buying cattle the other day," Hellwig says.

Schnell says cow sales at his barn typically attract more local buyers, purchasing on the reputation of ranchers in the area. But at the Dec. 29 sale, many more cattle than usual went out of state, to South Dakota, Minnesota and Iowa. The sale featured four quality dispersions, which attracts buyers, he says.

The price of calves also might have been a factor in pushing higher cow sales, Schnell speculates.

"This calf market is a lot stronger than the experts were expecting it to be," he says. It's possible people sold their calves for more than they were expecting, then had more funds to buy a few more cows.

Hellwig expects big runs of calves now that the holidays are over. The question will be whether the market can sustain big numbers. Schnell says the futures market indicates strength will hold.

"There must be something going on there," he says.

Many ranchers throughout the Dakotas culled deeper than usual due to dry conditions limiting days on pasture over the summer and the availability of hay for the winter.

The drought conditions eased in many places with late-summer and early-fall rains. But large portions of Montana, North Dakota and South Dakota remain in the "abnormally dry" classification on the U.S. Drought Monitor. North Dakota has a little more than 4 percent of the state in the severe drought category and more than half the state in moderate drought. Conditions remain worse in Montana and South Dakota, each of which have portions in extreme drought. Designations aren't expected to change much until after winter snowfall concludes.

Hellwig and Schnell say some ranchers may have been buying small groups to replenish their herds, but neither thinks that is a major reason for the hot sales.

However, Hellwig says the mild fall meant some ranchers have more hay than they were expecting, and many likely will be interested in getting their numbers back up. The wildcard will be whether more moisture comes in 2018 than in 2017.

"Most of the ranchers are short of cows," Hellwig says.

"I think most of the people who are really short of hay are going to wait until they know they have grass and hay," Schnell says.

Producers in drought-stricken counties who had to sell down more than usual due to the dry conditions may defer tax on the extra gains from those sales, according to the Internal Revenue Service. For more information on how that works, visit https://www.irs.gov/pub/irs-drop/n-06-82.pdf. Producers in the 53 Montana counties, 38 North Dakota counties and 47 South Dakota counties qualify for the extension. View the complete list of counties nationwide at https://www.irs.gov/pub/irs-drop/n-17-53.pdf.

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