Current cattle markets can be thought of as a series of bad news-good news stories, said Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel in the Extension Service’s Cow/Calf Corner.
The bad news is that cash fed cattle prices dipped last week from the previous week’s highs, Peel said. The good news is that the price jump was not expected, and the latest (projected) level still is at or above most expectations.
After its own unexpected run-up, live cattle futures also pulled back last week from highs the week before, he added. Nevertheless, cattle futures still offer attractive levels to lock in fed cattle for the spring.
It’s not clear if futures simply are making a technical correction with some profit taking, but a long speculative position makes it vulnerable, he said, so opportunities may be fleeting.
FEEDER SITUATION SIMILAR
A similar story exists for feeder futures with recent declines from unexpectedly high peaks in early November, Peel said.
The good news is that declines have been quite orderly, and spring contracts remain at levels that offer unusual opportunities for feeder cattle producers to lock in attractive margins.
But, as with live cattle, feeder futures are built on long speculative positions that could turn into an abrupt, sharp drop, he warned.
Cash feeder cattle markets have been unseasonably strong this fall…bad news for stocker buyers but good news for cow/calf producers, he said. However, even at current prices, good opportunity exists for producers, although he advised downside risk management.
The bad news is that cattle slaughter is higher than last year, reflecting herd growth the past three years, Peel said. The good news is that steer and heifer carcass weights are sharply lower, offsetting a significant amount of increased cattle slaughter.
The upcoming Cattle on Feed report is expected to show another month of large placements in October, he said. This is consistent with the strong feeder prices and larger feeder market volumes this fall. The good news is that feedlot marketings remain strong as well and are limiting growth in feedlot inventories.
In the bigger picture, feeder supplies will continue to grow into 2018, and beef production is expected to increase another 4% year over year on top of a roughly 4% increase this year.
MEAT SUPPLIES STRONG
Combined with increased pork and broiler production, total meat supplies will be larger in 2018, Peel said. The good news is that strong beef demand has supported cattle and beef prices in 2017.
Retail beef prices are holding close to year-ago levels with boxed beef and cattle prices higher than last year.
In general, the good news outweighs the bad, but uncertainty and challenges will remain.
CATTLE, BEEF RECAP
About 465 head of fed cattle sold on the Livestock Exchange video auction last Wednesday at $124 per cwt, up $4 from a week earlier.
Light trade was reported last Tuesday in the Plains at $124 per cwt on a live basis, steady to $1 lower than the bulk of the previous week’s action. More trading was reported last Wednesday at $123 to mostly $124 and at $191 to $194 on a dressed basis, down $1 to up $3.
Bids were reported this week in the Plains at $119 per cwt with no takers.
The USDA’s choice cutout Tuesday was down $2.14 per cwt at $210.67, while select was off $0.34 at $193.49. The choice/select spread narrowed to $17.18 from $18.98 with 99 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday was $159.63 per cwt, down $0.37. This compares with Tuesday’s Nov settlement of $157.62, down $1.07.