Cattle Market Overshadowed By Supply

As US cow/calf producers transition into activities related to the end of summer and the beginning of fall, Josh Maples, assistant professor and Extension economist at Mississippi State University weighed in on the overriding themes of the cattle market.

Maples expressed his views in a weekly letter to Extension agents through the Livestock Marketing Information Center’s In the Cattle Markets.  It’s time to look at these factors and discuss how they could affect cattle prices this fall and beyond.

So far in 2018, large supplies, record exports and trade concerns are just a few of the topics that have dominated headlines, Maples said.  And, as producers wean calves, stocks are buying to populate winter pastures in other parts of the country.




Larger beef production continues to pressure on beef prices, Maples said.  Beef production rose by 6.4% in 2016 and 3.8% in 2017.  Current forecasts suggest about a 4% increase in 2018 and 1.5% in 2019.

Put it all together and that would be about a 16% increase in beef production in just four years, he said.  This would be the fastest four-year growth since 1973-1977.

Increases are slowing, though, Maples said.  All signs are pointing to slower herd expansion in 2018 and 2019, he said.  With respect to the cattle cycle, recent cowherd trends suggest 2020 could mark the end of the current US cattle inventory build-up.




While large supplies remain the biggest headwind to higher prices, strong domestic and international demand for US beef is providing price support, Maples said.  A strong US economy is supporting beef sales despite larger supplies of beef and larger supplies of competing proteins.

Internationally, robust exports have supported the demand profile for beef and, therefore, cattle, he said.  January through June exports were 14.7% larger than the same period in 2017 – and 2017 was a great export year.




Feeder cattle prices have fared relatively better than live cattle prices this year, relative to a year ago, Maples said.  Production and disappearance forecasts suggest 2018 fed cattle prices were expected to average 2% to 4% below 2017, while calf and yearling prices were expected to be very similar to 2017 levels.

One driver for that is lower corn prices, he said.  The latest USDA estimates for corn production call for another big corn crop on top of already large supplies, which is providing support for feeder cattle prices as it makes it less expensive to add pounds.




For the rest of 2018, feeder prices were expected to be a little lower than the same period in 2017 as larger supplies are weaned and sold, Maples said.

The slower herd growth paints a brighter price picture for 2019 and 2020, however.




Cash cattle traded last week at $109 to $110.50 per cwt on a live basis, down $0.50 to $1.00, and at $173 to $174 dressed, down $2 to $5.

No fed cattle sales were reported last Wednesday on the Livestock Exchange Video Auction.  Two weeks earlier, 851 head sold at an average price of $110.07 per cwt, versus the last sale at $112 two weeks previous.

The USDA choice cutout Tuesday was down $0.41 per cwt at $213.57, while select was up $1.79 at $204.08.  The choice/select spread narrowed to $9.49 from $11.69 with 92 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Monday, was $149.43 per cwt, down $0.23.  This compares with Tuesday’s Aug settlement of $149.17, down $0.45.