Cash fed cattle prices continue to follow last year’s trend lower, and with more cattle on feed, it’s a good bet the downward trend will continue, an agricultural economist says.
Marketings are key. Marketings through August and September will determine market price dynamics from October into next year, said Colorado State University Agricultural Economist Stephen Koontz, writing for In The Cattle Markets.
Larger fed cattle marketings will happen, and the fall run of calves will start early due to dry weather in the north plains. Heavier marketings were seen in June, and these will continue well through October.
With strong marketings, prices will just soften through the fall, but any swelling of feedlot showlists will have prices moving down sharply.
Fed cattle, calf and beef prices were strong through spring and early summer, amid excellent domestic demand and product movement from featuring, Koontz said. Even trade volumes were strong.
However, recent weeks have seen carcass values back off $250-per-cwt highs by more than 20%.
HEAVY PLACEMENTS
Feedlot placements since March have been 11% to 16% above last year, Koontz said.
The seasonal increase in slaughter weights is underway albeit 20 to 30 pounds behind last year. Current carcass weights are 12 to 13 pounds, or about 1.5%, behind last year.
Calculations of the inventory of cattle on feed more than 90 days and more than 120 days show both to be well below last year. This says marketings have been timely to aggressive through summer. This will continue to hold some strength in fed cattle prices, he said.
However, the inventory of animals on feed for more than 120 days dropped sharply while the inventory on feed more than 90 days increased sharply. Showlists are clean now, but very big numbers are coming, Koontz said.
FUTURES PRICED APPROPRIATELY
Live cattle futures are priced appropriately with Oct live cattle at a discount to Aug, showing that cash price pressure is coming, he said.
Domestic demand likely is not as strong as in the spring, but the world economy continues to post good news, and trade volumes are strong. There was some evidence in the spring that this was policy-trade-related just-in-case buying, but it continues to persist, and therefore has some fundamental justification.
But in the end, potential bullish news is hard to find.
Spring’s sharp up-moves in live and feeder cattle contracts have stopped and are unlikely to continue, Koontz said. Resistance was established in early May for summer and fall contracts. Resistance was tested in early June and then again in mid-July.
Thus, seasonal weakness into the fall is in the cards.
CATTLE, BEEF RECAP
The weighted average of fed cattle sold on the livestock exchange video auction last Wednesday was $115.04 per cwt, down $0.96 from $116.00 the previous week. Cattle with 1- to 9-day delivery sold at $115.28, versus $116 the previous week. Those with 1- to 17-day delivery sold at $114.50, and cattle with 17- to 30-day delivery sold at $114.00.
Cash trading took place last week at $114 to $116 per cwt on a live basis, mostly $115, down about $2 from the previous week. Dressed action was reported at $184 to $185, down about $2.
The USDA’s choice cutout Tuesday was up $0.03 per cwt at $198.95, while select was off $0.57 at $195.87. The choice/select spread widened to $3.08 from $2.48 with 88 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday was $145.32 per cwt, down $0.58. This compares with Tuesday’s Aug settlement at $145.35, up $3.05.