If Kansas feedlots are any indication, US feeders continue to chip away at their front-loaded supplies.
The average number of head Kansas feedlots marketed, or sold to packers for slaughter, in June exceeded last June by 1,740 head, or 45.4%, in going to 5,569 from 3,829.
Kansas feed yards have been working on trimming their inventories all year. The only time when the trend followed the five-year average was in February. Since then, marketings have risen above last year and the average, and there have been times when they were sharply above, like in March when marketings exceeded the average by 2,719 head, or 93.7%.
The reason for the selloff was lower prices in the futures market in coming months. The market’s best guess for future fed cattle prices was telling feedlot managers to sell cattle now, if possible, rather than keep them around to eat more feed and gain more weight before selling.
THE WEIGHT ISSUE
The sell-down of fat or nearly fat cattle for slaughter is harder to see when looking at data on market weights alone. KSU data point to heavier market weights when compared with last year and the previous five-year average.
The average market weight for steers in June was 1,399 pounds, up six, or 0.43%, from 1,393 in May. June’s weight also was up 41 pounds, or 3.02%, from the 1010-2014 average of 1,358.
The problem with just looking at steer weights as they exited the feed yard is that end weights are influenced heavily by the weight of the calves as they entered the feedlot months earlier.
In essence, it’s heavy in, heavy out, and the cattle that feedlots are marketing now generally entered at a higher average weight than last year or in the previous five years. This is because grass and hay was readily available, so cow/calf producers could pack on the weight and get more money per head than they could during the drought years.
The narrowing of the spread between June 2016 slaughter weights and last year or the previous five-year average in May and June corroborates the average feedlot sales numbers. Combined, they show a concerted effort to make a calf’s stay in the feedlot as short as possible, even when they come in at a heavier weight.
Anecdotal evidence also suggests lowered front-end supplies of feedlot cattle. Trade sources say feedlots are working the numbers lower, but such moves must be made carefully, or feeders risk overrunning the market with finished cattle.
CASH CATTLE MARKET $1 TO $2 HIGHER
Cash cattle markets Thursday traded $1 to $2 per cwt higher, with sales at $118 to $119 on a live basis and $188 to $190 on a dressed basis. Analysts expected more sales at these prices today.
Cash markets last week were $1 to $2.50 per cwt higher at $116 to $117.50 live and $186 to $188 dressed.
The USDA’s choice cutout Thursday was $0.06 per cwt higher at $199.26, while select was up $0.81 at $190.85. The choice/select spread widened to $8.41 from $7.54 with 84 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Wednesday was $145.64 per cwt, up $0.37. This compares with the Aug settlement Thursday of $147.57, up $0.10.