Even though feeder cattle prices are softening as more calves come to the auction barns, it doesn’t mean prices will continue to soften. It just means the markets will be more confusing.
Fall cattle marketings began to rise a couple of months ago, easing the market into the September/October gut slot of the fall weaning and sales push. Accordingly, auction barn prices are fading with the increased supply.
The CME Feeder Cattle Index, a composite of several auction barns, hit its peak of $231.30 per cwt, on June 26 and Wednesday was listed at $212.34, a decline of $18.96, or 8.20%.
When prices for Southern Plains feeder cattle are broken down into weight segments, the 500- to 600-pound weight range has declined the most, dipping $29.81 per cwt, or 10.5%, to $253.10 last week, according to USDA reports compiled by the Livestock Marketing Information Center.
Other weight categories also declined but not as much. It might be expected, then, that prices will continue to decline into the fall as supplies increase. They could, but they often don’t.
MEET THE SEASONALS
Averaging the 2009-2013 Southern Plains feeder cattle prices for the different weight ranges shows a tendency to flatten or even rise through the period. This tendency follows the typical summer decline and more or less mirrors a rise in fed cattle prices linked to rising demand for holiday rib roasts and other cuts.
To be sure, price patterns in some years don’t follow that pattern, and this year could be one of them.
Many cattle feeders are losing money on fed cattle, and the prospects for getting out of the hole don’t appear to be good since packers themselves are struggling with retail beef demand in light of an uncertain economy and increased competition from other meats.
Still, “hope springs eternal” and feeder cattle demand could follow fed cattle higher through the fall.
SUPPLIES COULD RULE
However, beef production likely will rise through the fall, possibly stifling a seasonal price increase for fed cattle, which in turn could keep a lid on feeder cattle prices. A limiting factor here could be holiday demand.
Another limiting factor could be a change in the way ranchers market their calves. There is a growing tendency toward adding value to calves by weaning and vaccinating them before sale. Buyers increasingly are paying more for these backgrounded calves, making the effort worthwhile.
But that delays their sale to the feed yards, potentially disrupting seasonal flow patterns.
Slaughter cattle weights continue to rise as feedlots delay purchases of feeder cattle for as long as is practical, choosing instead to add weight to the cattle already in their lot.
And, along with this year’s seasonal increase in feeder cattle supplies are prospects for even more being auctioned in coming months as the cow herd expands from its lowest point in more than 60 years.
The psychological implications of more cattle just over the horizon may weigh on price performance this fall and go against the seasonals.
CASH FED CATTLE TRADE QUIET
Cash cattle markets remained quiet Wednesday as traders watched futures tumble after a round of short covering lifted the market early. Continued concerns about beef demand weigh on traders’ minds.
Packer bids were $144 per cwt on a live basis and $226 dressed with asking prices holding at $150 live and $236 dressed.
Cattle last week were mostly $145 to $147.50 live and $232 to $234 dressed.
The USDA reported mixed boxed beef prices Wednesday with choice up $0.38 per cwt at $244.24 and select off $0.20 at $233.60.
The CME Feeder Cattle Index for the seven days ended Tuesday was $212.34, down $0.84. This compares with the Aug settlement Wednesday of $210.27, down $0.62.