August is a tough time for fed cattle markets to move higher, but they seem poised to break out moving into the last part of the third quarter, said Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in a letter to Extension agents called Cow-Calf Corner.
CALF PRICES FIRMING
Auction calf and stocker prices moved counter-seasonally higher in July-August while feeder cattle markets, which typically increase through the summer, have shown a strong seasonal price increase, Peel said.
The August USDA Cattle on Feed report pegged July feedlot placements at 1.739 million head, 91.9% of last year, with July marketings at 1.9 million, 95.5% of one year ago, he said. The Aug. 1 total was 11.074 million head, 98.1% of 2020.
Feedlot inventories continue to fall, Peel said. This is seasonal, but it also reflects the cleanup of the backlog of feedlot cattle from earlier in the year.
August represents the sixth straight monthly decline in feedlot inventories from the February peak, a decrease of 1.032 million head or 8.5%, he said. In the previous five years, the average feedlot inventory decline from the spring high to summer low has been 6.2%.
CARCASS WEIGHTS DOWN
Carcass weights dropped below a year ago in May and have held there, reaching a seasonal low in June, a tad later than the normal May low and are rising seasonally into the last part of the year, he said. Most recently, weekly steer carcass weights were 896 pounds, down 10 year over year but still 18 heavier than 2019.
Heifer carcass weights were 817 pounds, down 15 from last year but 11 above 2019, Peel said. Lower carcass weights also reflect the effect of sharply higher feedlot cost of gain and should help hold carcass weights in check in coming months.
FUTURES REFLECT BULLISH OPTIMISM
Cattle market optimism is reflected in futures markets, Peel said. Dec live cattle were $10 per cwt above last week’s cash with Apr $140 per cwt more.
Feeder cattle futures have been strong this summer and are seen even higher this fall, he said. Weak feeder cattle basis in June and July suggested the futures optimism was somewhat ahead of the cash market reality.
Cash feeder cattle markets continue to adjust to higher feed costs, Peel said, but the flattening price line across weights translates into higher value of gain potential.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $121.51 to $127.50 per cwt, compared with last week’s weekly range of $124.26 to $125.75. FOB dressed steers and heifers went for $190.85 to $197.23 per cwt, versus last week’s $197.57 to $203.18.
The USDA choice cutout Wednesday was down $0.69 per cwt at $346.89, while select was off $1.21 at $315.69. The choice/select spread widened to $31.20 from $30.68 with 61 loads of fabricated product and 37 loads of trimmings and grinds sold into the spot market.
The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.60 to $2.00 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.40 over Sep, which settled at $5.51 1/4 a bushel, up $0.06 3/4.
Nineteen heifer and 14 steer contracts were tendered for delivery against the Aug live cattle. Forty heifer contracts were retendered at one.
The CME Feeder Cattle Index for the seven days ended Tuesday was $158.07 per cwt up $1.47. This compares with Wednesday’s Aug contract settlement of $159.30 per cwt, up $0.72 and Sep’s $165.15, down $0.62.