Futures prices for feeder cattle have taken a big hit in the last few weeks, closing the wide gap between futures contracts and cash prices.

“It’s really difficult to know what’s going on in the feeder cattle market right now,” said Andrew Griffith, agricultural economist at the University of Tennessee.

Cash prices for feeder cattle have been steady since November, but futures prices started escalating in March — moving up $8, $9, $10 a hundredweight. Immediately following Easter, futures prices dropped $16 to $17, he said.

“We lost everything we gained times two,” he said.

May contracts topped out at $154 on March 22 and were at $151 on April 18 just before the fall. August contracts that Thursday before Easter were just shy of $161, and fall contracts hit $162, he said.

The futures market might have been overpriced, with traders now realizing there are still a lot of cattle in the country not yet on feed. The number of cattle in feedlots is also a factor, he said.

“Cattle on feed numbers have been really strong the last few months. That is what caused a decline in the market,” he said.

Prices in nearby futures contracts are converging with cash prices — which have dipped a little the past couple of weeks, spurred by the washout in the futures market, he said.

May feeder contracts on the Chicago Mercantile Exchange on Tuesday were at $136.25 and the weighted cash index price was at $135.39.

There’s certainly been a lot of volatility in the feeder cattle futures and multiple reasons for the leakage, Kevin Good, vice president of industry relations for CattleFax, said.

Trading has ranged from about $140 to $160 over the last three years. A few weeks ago, it was at the top of that range and maybe got too high. Now it’s at the bottom, he said.

The market could have been driven higher on speculation of increased beef exports due to African swine fever in China. But markets recognized prices were at the top end a couple of weeks ago and are now coming back closer to supply and demand, he said.

Trade uncertainty, tariffs and the inability to get an agreement with China add fuel to the fire, he said.

Futures prices needed to come down, said John Nalivka, president of Sterling Marketing in Vale, Ore.

By his accounting, futures prices for feeder cattle have been way too high.

“You can’t plug those numbers in and come up with a positive feeding margin,” he said.

There’s been a pretty sharp drop in live fed cattle prices, about $6 a hundredweight in the past two weeks — and he’s expecting it to move lower through September, he said.

Buying feeder cattle at $148 per hundredweight in April will put feedlot breakeven on fed cattle in September at $113. With his projected fed cattle price of $110, feedlots will be losing $50 a head in that scenario, he said.

Feedlots are protecting their margin and putting some pressure on feeder cattle prices, he said.