weaning baby calves

Demand remains strong for yearlings and long-weaned calves

Cattle markets took higher feedlot placements in stride

Perhaps the subdued reaction by markets to last Friday’s monthly Cattle on Feed report—September placements 13.5% higher—serves to underscore the current fundamental strength of the market. The news pressured Cattle futures lower Monday morning, as expected, but prices regained much of the lost ground by the end of the session (see “Demand and aggressive marketing…”).

Futures prices continued to gain during the week, supported by higher wholesale beef values and the front end of seasonally fewer market-ready fed cattle. Positioning and profit taking helped take prices a touch lower to end the week.

Steers and heifers sold uneven, from $3 per cwt lower to $3 higher, according to the Agricultural Marketing Service (AMS).

“Most of the lower trending markets occurred early in the week prior to the surge in the CME Cattle complex,” AMS analysts say. “Demand was moderate at best for spring calves and moderate to good for yearling cattle as they are getting harder and harder to come by this time of year. The long-weaned calves are in much more demand than the un-weaned, fleshy bawlers that will become more prevalent as the calendar moves towards Thanksgiving. However the health on short-weaned calves will get an extra boost as an Alberta Clipper is hitting the Northern Plains and Midwest late this week…”

Demand for replacement heifers ran strong in some parts of the country, too. At Mobridge Livestock Exchange in South Dakota on Tuesday, for instance, a strong test of 5-weight replacement-quality heifers brought $193-$195 per cwt.

Not counting newly minted away Oct, Feeder Cattle futures closed an average of $4.00 higher week to week on Friday ($1.49 to $4.85 higher).

Armed with the rally in futures, cattle feeders continued to pass on packer bids for fed cattle prices through Friday afternoon. The previous week, live prices were at $110-$112 with dressed trade at $175.

“Asking prices on a live basis were $116-$118 per cwt and $180-$185 on a dressed basis. Bid prices on a live basis were $111 to $112,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Cattle feeders continue to hold out for higher finished cattle prices as October live cattle futures gained $6-$7 since the beginning of the month…cattle feeders are pointing towards the December contract which is trading north of $120 and $5 higher than the October contract.”

Live Cattle futures closed an average of $2.92 higher week to week on Friday ($1.62 to $4.75 higher).

Choice boxed beef cutout value was $3.44 higher week to week on Friday afternoon at $203.30 per cwt. Select was $1.34 higher at $191.14.

“Demand for beef continues to be strong, though it has demonstrated signs of softening,” Griffith explains. “Beef supply has increased and retail beef prices have decreased compared to the previous couple of years. Consumers are buying more beef at lower prices than a couple of years ago but the magnitude of how they change together is needed to determine change in demand.”

Less frozen beef than last year

Total frozen beef supplies continued to be lower year over year in September, according to the monthly Cold Storage report issued by USDA this week.

As of Sept. 30, beef in freezers was 2% more than the previous month, but 6% less than the same time a year earlier.

Frozen pork supplies were up 7% from the previous month but down 4% from last year.

Total red meat supplies in freezers were up 4% from the previous month but down 5% from last year.

Total frozen poultry supplies were 1% more than the previous month and up 8% from the same time last year.

Grass hay prices weaken

Despite lower national hay production this summer, according to the Livestock Marketing Information Center (LMIC), prices for grass hay are weakening, due in part to favorable August pasture conditions and robust carryover supplies in the Southern Plains.

“USDA's National Agricultural Statistics Service (NASS) estimated that U.S. hay production would be close to 132 million tons in 2017, down 3 million tons from last year,” LMIC analysts explain. “Alfalfa hay production is pegged to be down 4%, and all other hay production is down 1%. Average alfalfa yield per acre is down 5% from a year ago, explaining all of the declines in output, as alfalfa area harvested increased 1% from 2016. As would be expected, states experiencing severe drought conditions in the Northern Plains suffered the biggest declines in alfalfa yields.”

Until August, LMIC analysts say 2% less hay production, in tandem with the growing cowherd, were holding prices higher year over year. Then came August.

“Grass hay values were surprisingly weak in August, mostly due to a 25% price decline in Oklahoma, the third largest non-Alfalfa hay producing state,” LMIC analysts explain, in the most recent Livestock Monitor. “Grass hay prices were down 5% in Texas, the largest producer of non-Alfalfa hay. California, Minnesota, and Ohio also recorded double-digit percentage declines in non-Alfalfa hay prices from July to August.”

Incidentally, winter wheat planting still lags in key wheat-pasture states. According to the most recent Crop Progress report from USDA, 41% is planted in Kansas, which is 20% less than last year and 22% behind the average. Oklahoma is catching up with 55% planted, compared to 62% last year and 63% for average. Nationwide, 75% of winter wheat is planted, which is 3% less than last year and 5% less than average.

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