Exactly how continuing drought, reduced forage production and high feed prices will affect cattle and beef markets in the coming months remains uncertain. Nevertheless, the second half of 2022 is shaping up to look significantly different than the first half of the year, said Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel.
Writing in a newsletter to Extension agents called Cow-Calf Corner, Peel said, “The general direction of cattle and beef market forecasts for this year has not changed but annual forecasts have been modified by the way the first half of the year has played out; with implications for a significantly different second half….”
BEEF PRODUCTION COULD DECLINE
Annual beef production was projected to decrease from last year’s record, he said, but the magnitude of this decrease has been trimmed to roughly 1%.
First-half beef production was up about 1%, meaning second-half production now is projected to drop more sharply and is forecast to decrease nearly 4% from last year, Peel said.
Lower beef production going forward implies cattle slaughter will decrease as well, he said. Slaughter currently is forecast to decrease by 1.0% for the year.
In the first half, total cattle slaughter was up by 1.4% year over year, he said. The increase is because more female slaughter with total cow plus heifer slaughter up 4.5% in the first half of the year.
Thus far, increased female slaughter more than offsets the 1.6% year over year decrease in steer plus bull slaughter, Peel said. Total cow slaughter is up 6.1% so far this year with dairy cow slaughter down 3.1% partially offsetting the 14.6% year over year increase in beef cow slaughter.
For the rest of the year, total beef cow slaughter likely will remain higher year over year by double-digits and total cow slaughter is likely to increase by 5% to 6% year over year. This means reduced cattle slaughter will be realized by less steer and heifer slaughter.
LOWER FED SLAUGHTER
Reduced second-half fed slaughter implies reduced feedlot marketing rates, Peel said. Feedlots, as of June 1, had record inventories of cattle on feed, which seems to be at odds with the idea of reduced marketings in the coming months.
However, feedlots have been placing larger numbers of lightweight cattle, leading to more days on feed and slower marketing rates, he said. Feedlots will work through current inventories in the second half of the year.
May placements showed the largest year-over-year monthly decrease since last September, Peel said. Smaller placements in the coming months will lead to lower feedlot inventories by the end of the year unless drought forces even larger numbers of cattle into feedlots.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $138.00 to $147.64 per cwt, compared with last week’s range of $138.00 to $151.00. FOB dressed steers, and heifers went for $217.96 to $222.06 per cwt, versus $217.54 to $229.38.
The USDA choice cutout Thursday was up $0.02 per cwt at $268.07, while select was down $0.35 at $242.58. The choice/select spread widened to $25.49 from $25.12 with 101 loads of fabricated product and 25 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $2.65 to $2.85 a bushel over the Sep futures and for southwest Kansas were steady at $0.10 under Sep, which settled at $6.09, up $0.09 1/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $162.90 per cwt down $2.18. This compares with Thursday’s Aug contract settlement of $172.47, down $0.82.