On-Feed Report May Weigh On Cattle Prices

Today’s USDA Cattle-On-Feed report is expected to show an increase in the number of cattle placed into US feedlots in March, a move that will add weight to market prices over the coming weeks and months.

Pre-report estimates indicated expectations for placements to be up 6% to 7% on average with the range of estimates in Reuters’ survey of market analysts running from down 3.4% to up 11.0%.

The March report showed indicated that the number of cattle on feed for fewer than 90 days was sharply lower, while the number of those on feed for 120 days or more was sharply higher.  And many had expected a greater selling desire among cattle feeders in the form of larger feedlot showlists by now.

Stephen Koontz, professor of Agricultural Economics at Colorado State University, put it this way in an article this week for the Livestock Marketing Information Center.

“We are a good month past the time when I thought this cattle market wreck would be cleaned up,” Koontz said.  “It started late last summer with huge slaughter weights and expanding market ready fed cattle inventories.

“But these long-fed inventories persist.  Will the industry clean-up showlists prior to the seasonal increases in supplies starting in August and continuing through October?

“This week will help inform, but time is getting short,” he said.

 

SLAUGHTER WEIGHTS REMAIN RELATIVELY HIGH

 

Apparently, feeders are keeping cattle on feed for as long as possible to wring every per-head penny out of them.  Slaughter weights are declining, but the decline is seasonal, and weights remain well above last year and the 2010-2014 average as shown in  USDA Agricultural Marketing Service and National Agricultural Statistics data.

Carcass weights for fed steers for the week ended April 9 came in at 880 pounds, down four from a week earlier but still nine pounds, or 1.03%, above a year earlier’s 871 pounds.

Seasonally, carcass weights should bottom in late April and begin moving higher.  But if the front-loaded feedlots also begin selling more cattle that can’t gain any more weight at a lower cost than the fed-cattle market is giving them, the pressure on prices could be extremely high.

 

FEEDER CATTLE ALSO VULNERABLE

 

Feeder cattle markets also could suffer from the weight of heavy fed cattle, extra beef on the market and profitable hog and chicken producers cranking out more pork and chicken.

If fed cattle prices tumble under the weight of increased production, feeder cattle prices also can be expected to follow suit.  Feeder prices already are feeling the heat as every move in the live cattle futures market seems to be mirrored in the feeder cattle market.

That is especially true of price declines as traders expect increasing numbers of feeder cattle to hit the markets this year as the US beef cow herd continues to grow.

 

CASH CATTLE MARKET TRADES LIGHTLY

 

Cash cattle markets Thursday traded lightly with scattered sales in Nebraska reported at $127 per cwt on a live basis, down $7 to $8 from last week.  Most asking prices were around $132 to $134, however, so little was done.  In dressed markets bids were posted at $200 to $208, down from $209 to $210 on Tuesday with asking prices undefined.

Cattle last week traded at mostly $134 to $135 per cwt on a live basis, up $1, and at $214 to $216 dressed, unchanged.

The USDA’s choice cutout price Thursday was down $2.05 per cwt at $220.72, while select was off $0.19 at $212.77.  The choice/select spread narrowed to $7.95 from $9.81 as 150 loads of fabricated product were sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $152.88 per cwt, down $1.19.  This compares with the Apr CME settlement Thursday of $149.45, up $0.05.