Dig a picture out of the files, one depicting cattle markets a year ago. Flip it upside down and look at it from the other direction. That’s a pretty fair reflection of current reality, with softening wholesale beef values chasing fed cattle prices lower, goosed along by heavier carcass weights and less current marketing.

“The feeder cattle market remains very bearish with all systems go to the downside,” explain analysts with the Agricultural Marketing Service (AMS).

Yearling feeders traded $5-$15 per cwt lower this week, according to AMS. Calves sold $10-$20 lower with instances of $25 lower.

“Several auctions saw the arrival of spring-born calves, but have yet to see them arrive in droves,” AMS analysts say. “The increased supply of calves getting ready to hit the market at lower prices will cause buyers to be extremely more selective in their purchases. With the market in a downtrend, discounts will more than likely become even more severe on un-weaned and fleshy calves.”

Though calf and feeder prices remain strong when measured against history, economic misery at the feedlot is taking a healthy bite out of calf and feeder prices.

“There was light demand for spring-born calves; preconditioning status made little difference,” explained the AMS reporter on hand for Monday’s auction at Sioux Falls Regional Livestock in South Dakota, where feeder steers and heifers traded $5-$10 per cwt lower than two weeks earlier. “Buyers were proceeding very cautiously, especially on calves, as there was just very little interest, even though those prices are sharply lower than they were a month ago. Cattle feeders are feeling the sting from their outgoing fed cattle posting heavy losses and are determined to buy cattle with a workable breakeven. Buyers are very cognizant of quality or the lack of it and are bidding accordingly.”

Feeder cattle futures closed an average of $9.18 lower week-to-week.

Analysts with the Livestock Marketing Information Center (LMIC) expect calf pries to remain below year-ago levels for the remainder of the year. They expect feeder cattle prices to continue eroding well into 2016.

On the other side of the ledger, cash fed cattle this week sold $4-$5 lower at $135-$136 per cwt. Dressed trade in the north was mostly $7-$8 lower at $210-$214, according to AMS.  

“The challenges of bearish fundamentals facing the cattle complex are not letting up,” AMS analysts say. “Heavy carcasses and inflated market-ready supplies throughout the Corn Belt have allowed packers to propel the fed cattle market lower. The protein machine is still putting out a good amount of pork and poultry with concern about beef demand.”

“The bottom for this year may not yet be found, but the more pressing questions are how fast prices will recover from the summer lows and how high fed cattle prices will be in late fall and early winter,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “The futures market does not currently see much of a rebound occurring this fall and winter, but fed cattle prices will bounce back when the backlog of cattle are moved through the system.”

Live Cattle futures closed an average of $4.01 lower week to week.

Wholesale prices tumble

Choice boxed beef cutout value was $9.79 lower week to week at $226.30. Select was $7.47 lower at $219.26.

“Beef prices tumbled again this week, and it appears consumers are not willing to continue paying for high-priced beef products in today’s market,” Griffith says. “The beef market has seen its fair share of turbulence and probably will continue to do so over the next several months if packers continue manipulating the market by managing kills to support price. The management of slaughter and thus the continued delay of cattle being marketed will continue to result in heavier cattle being slaughtered and a backup in cattle movement.”

Another reflection of increasing cattle and beef supplies comes in formula-based discounts, at least for the fattest cattle.

“In September of this year, the USDA-AMS report began to show that discounts for Yield Grade (YG) 4 and 5 carcasses (those with the most fat) were increasing. Those discounts had been essentially unchanged since late June 2014,” say LMIC analysts, in the latest Livestock Monitor. “In early August, the weighted average discount on YG 4 carcasses compared to YG 3s was $8.27 per cwt; it’s now $9.27. In that same timeframe, YG 5’s went from a discount of $13.12 per cwt to, most recently, $14.74.

“Those YG 4 and YG 5 discount increases reflect three interrelated factors: 1) increased overall supply of market-ready cattle available to packers; 2) large relative supplies of YG 4 and YG 5 animals, which are mostly over-finished, very heavyweight cattle, and 3) the weak wholesale prices of 50s trim, the product removed from steer and heifer carcasses during the process of making marketable beef cuts.”

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As reported in the previous BEEF Cattle Market Weekly, sluggish exports are adding pressure.

“The impact of appreciation of the U.S. dollar on beef trade is twofold,” say analysts with USDA’s Economic Research Service, in the monthly Livestock, Dairy and Poultry Outlook. “In regard to exports, the relative strength of the dollar against the currencies of major trade partners has been a drag on beef shipments this year. On the flip side, the strengthening dollar has been an influence on the surge in beef imports.

“The strong dollar relative to other currencies has made the United States an attractive market. Furthermore, the limited availability of lean beef for processing due to low cow slaughter levels and lower overall beef production will continue to support U.S. beef imports.”

“There is a great deal of uncertainty surrounding today's cattle markets. The bears have been running the show recently, and it looks like the trend might continue in the near future,” explains Brian Williams, an Extension agricultural economist at Mississippi State University, in the latest In the Cattle Markets. “The possibility always exists that markets could turn the other way, particularly given such tight supplies. It is more important now than ever before that U.S. cattle producers are aware of market movements and how price fluctuations can impact their bottom lines, especially those who plan on retaining their calves past weaning.”

At least Friday’s monthly Cattle on Feed report looks to be neutral, if not a touch bullish.

Cattle on feed Sept. 1 of 9.99 million were 3% more year-over-year. That’s in line with pre-report estimates.

August placements of 1.63 million were 5% less year over year. That’s the least since the price series began in 1996. Ahead of the report, expectations were for placements to be about even with last year.

August marketings of 1.59 million were 6% less than at the same time the previous year. That’s also the least in the price series that started in 1996. It’s in line with the average expectations of surveyed analysts.

“Relatively speaking, prices (calf and feeder) are still extremely strong. Cow-calf producers should continue experiencing strong profits at current price levels,” Griffith explains. “The situation for margin operators is a little different, but the news is not all bad. Stocker producers and feedlot managers realized record returns per head in 2014 as prices continued to climb because they were able to sell cattle on a stronger market than when they purchased the cattle.”

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