Futures markets and then cash trade this week took a bearish view of last Friday’s Cattle on Feed report—especially placements of 10% more year to year in February—but Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, says the reality requires perspective.
“First, the extra day in February allowed more placements during the month,” Peel explains in his weekly market comments. “Secondly, it was compared to a small 2015 value that was nearly 5% under the five-year average. Nevertheless, it was up and was the first significant year-over-year increase in placements in two years. Larger feeder cattle supplies mean that more cattle will be coming to feedlots and increased year-over- year placements will likely be the expectation for many months to come.”
Between the expected increase in feedlot marketings over the coming months, along with heavier carcass weights, analysts with the Livestock Marketing Information Center (LMIC) expect U.S. beef production to be 2-4% higher in the first half of this year compared to 2015, with production accelerating in the second half. In this week’s Livestock Monitor they explain beef production next year is forecast to be 3-6% more than this year, with tonnage similar to that in 2013.
“Look for fed cattle prices to be lower in the second half of 2016 compared to the first six months of the year. Larger slaughter-ready cattle supplies and large pork production could easily cause prices to be the lowest this year during the fourth quarter,” LMIC analysts say.
Preliminary LMIC forecasts see fed cattle prices this fall unchanged to slightly above the quarterly average levels of late 2015. Yearling and calf prices are forecast to remain below those in 2015.
“In the fourth quarter of this year, look for prices of 700-800-pound steers to be 8-12% below 2015—upper $150s to lower $160s per cwt in the Southern Plains,” LMIC analysts say. “Look for 500-600-pound steers to be 1-10% lower year on year—upper $180s per cwt to mid $190s in the Southern Plains.”
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