Cattle Feeders Set Modest Pace For Getting Current

Live cattle futures are telling feedlots that the market wants their finished cattle sooner rather than later, but they aren’t responding with aggressive sales.

The latest USDA/National Agricultural Statistics Cattle-On-Feed report showed that daily average fed cattle marketings were up in April at a pace that goes against a seasonal flat spot.  Feeders are getting caught up on their sales, but there are signs the commitment to faster sales is less than whole-hearted.

 

WHAT THE MARKETS SAY

 

When futures prices of any commodity are higher for each succeeding delivery month, the market is telling producers that it wants their products in a timely manner.  In effect, the market is paying them part of the cost of keeping their products at home.

But when futures prices reverse that order and get higher in the nearby delivery months than in subsequent delivery months, the market is saying it wants their products more now than later.  In essence, the market is charging producers to keep products at home.

The reasons for prices to be higher nearby than in deferred delivery months can be varied, but they include perceptions that supplies of the commodity will be greater in coming months, making higher prices harder to sustain.

That is the case with the cattle market currently; the herd is growing, even though returns to the cow/calf producer are diminishing, and the life cycle of cattle is so long there does not appear to be anything on the horizon that will alter this fact any time soon.

As of Thursday’s close, CME Group live cattle futures were higher in the nearby months and lower in deferred months.  The Jun contract settled at $118.92 per cwt with Aug at $115.34 and Oct at $114.82.  With the exception of the Dec contract, which bumped up to $115.12, the trend toward lower prices goes out to Aug’17, which settled at $105.57.

 

CONFLICTING NUMBERS

 

While total marketings in April were up, sales to packers as a percent of cattle on feed dropped at an unseasonally rapid pace.

In addition, total fed cattle marketings showed a similar unseasonal decline.

The result is that feedlots were about as current with their fed-cattle inventory in April as they were in March—but that’s OK.  They aren’t as current as they were last year at this time, but they are more current than the 2010-2014 average.

The percent of cattle on feed longer than 90 days at the end of April was listed by NASS at 29.36%, compared with 29.38% in March, 28.0% a year ago and the average of 30.69%.

 

CASH CATTLE MARKET LOWER

 

Cash cattle markets Thursday were $6 per cwt lower at $125 up to $125.50.  No trades were reported in dressed markets, but bids were around $197 while asking prices held at $200.

Cash markets last week were $1 to $3 per cwt lower at mostly $130 to $132 live and $204 to $206 dressed.

The USDA’s choice cutout Thursday was $0.85 per cwt lower at $222.72 per cwt, while select was off $1.82 at $203.26.  The choice/select spread widened to $19.46 from $18.49 with 120 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $147.60 per cwt, down $0.93.  This compares with the May settlement Thursday of $145.90, up $0.42.