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CattleFax projects favorable fall calf market Burt Rutherford

Fall price outlook similar to last year

Calf and feeder cattle prices trended steady to $4 per cwt higher, while cash fed cattle prices mostly held their ground.

Heading into the fall run of calf marketing, it’s hard to argue for prices much higher or lower than they were a year ago.
Steers and heifers sold steady to $4 per cwt higher this week, according to the Agricultural Marketing Service (AMS).
“The supply of feeders was light as several early-week auctions were dark in observance of the holiday and most others had limited offerings,” say AMS analysts. “Demand for feeders was good, although buyers are showing a stronger preference for cattle with good health programs as fall temperature swings become a concern.” 
Although fourth-quarter calf prices could average slightly below last year, analysts with the Livestock Marketing Information Center (LMIC), explained in August they should be similar. That’s with more cattle and more beef production.
Beef production in July of 2.23 billion pounds was 6% more than a year earlier, according to USDA’s August Livestock Slaughter report. That was with 6% more total cattle slaughter (2.77 million head). For January through July, beef production was 4% higher.
For price perspective, the August Livestock, Dairy and Poultry Outlook (LDPO) forecasts feeder steer prices at $147-$151 per cwt in the third quarter and at $143-$151 in the fourth.
Though still range-bound, cattle futures provided some support, suggesting that perhaps the market is moving beyond the reality of heavy third-quarter supplies.
Feeder Cattle futures closed an average of $3.21 higher  week to week on Friday.
Further down the road, the cattle cycle should become more supportive.
“If the general trends of the first half of 2018 persist, as of Jan. 1, 2019, the U.S. cowherd likely will be up well less than 1.0% year over year,” say LMIC analysts. “That suggests cyclically stronger calf prices are ahead (e.g., calf prices in the fall of 2020). Pre-planning may position a cattle operation to take advantage of this market transition.”
Likewise, Josh Maples, Extension livestock economist at Mississippi State University, explained in a recent issue of In the Cattle Markets, “Looking beyond 2018, slower herd growth numbers begin to paint a brighter price picture for 2019 and 2020. If the strong domestic economy maintains or grows and exports continue to gain steam, it is not difficult to project higher prices in the fall of 2019 compared to fall 2018.”
Negotiated cash fed cattle trade was generally steady with the previous week, with live sales mostly $107 per cwt and dressed sales at $170.
Live Cattle futures closed an average of $1.61 higher week to week on Friday.
Even so, in his weekly market comments, Andrew P. Griffith, agricultural economist at the University of Tennessee, says, “The late summer market has held up very well with only two more weeks of summer based on the calendar. Live Cattle futures are calling for higher prices this fall and winter.”
The August World Agricultural Supply and Demand Estimates (WASDE) projects fed steer prices (Five Area Direct) for the third-quarter at $107-$111 per cwt. Estimates for the fourth quarter are $109-$115; $116-$126 for the first quarter next year.
Wholesale beef values continued their seasonal decline. Week to week, Choice boxed beef cutout value was $3.13 lower Friday afternoon at $206.56 per cwt. Select was $4.18 lower at $197.09.
“Demand for beef can and likely will remain strong, but wholesale beef prices will still succumb to downward pressure,” Griffith explained a week earlier. “Lower wholesale prices should not be interpreted negatively as this is a seasonal trend and prices are expected to be relatively strong for the time of year and the quantity of beef products available.”
“Beef trade has been supportive of beef prices (see “Beef  exports continue record pace”). The bigger trade concern for cattle is the indirect effects from decreased trade opportunities for pork,” explains Brenda Boetel, Extension livestock economist at the University of Wisconsin-River Falls, in the latest issue of In the Cattle Markets.
“Futures markets will react quickly and aggressively to political announcements that may or may not materialize into market changes. Increasing or decreasing market export opportunities is similar to increasing or decreasing the size of the cattle herd. It takes a long time to increase the number, but we can lose our markets very quickly.”
Arguably, markets received a bump from the prior week’s announcement that the United States and Mexico signed a trade pact. But, Boetel notes the agreement is yet to be finalized. Trade talks also continue with Canada.

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