Cattle markets this week suggest the worst of the price impacts from the Tyson fire in Kansas are in the rearview mirror.
Feeder cattle prices continued to bounce higher as futures prices rallied and buyer confidence improved with higher fed cattle prices.
Steers and heifers sold $4-$8 per cwt higher in the North Central and South Central regions, according to USDA’s Agricultural Marketing Service (AMS). Calves in the Southeast traded steady to $2 higher.
“Demand was much improved after the bullish Cattle on Feed report confirmed much lower feedyard placements, which is supportive for the coming months in the fed cattle market,” say AMS analysts. Those analysts note auction receipts for the week of 208,000 head were the most since April.
Week to week on Friday, Feeder Cattle futures closed an average of $5.13 higher. That makes for an average of $7.78 higher over the last two weeks.
“Yearling feeder cattle producers were feeling better about the market and willing to consign their cattle for sale,” say AMS analysts. “They’ve been able to hold their cattle on grass as grazing has been plentiful and a lack of a killing frost in northern areas have allowed yearlings to stay out on grass without losing pounds. Consignments of spring-born calves have not hit their stride yet. Demand has been moderate to good, especially for those calves on a vaccination program.”
Demand for calves to graze winter wheat is likely adding support, although planting is delayed in some areas due to dryness. According to the most recent USDA Crop Progress report, 22% of winter wheat was planted (week ending Sept. 22), which was 4% less than the same time last year and 2% less than the five-year average.
“Some of the support in the feeder cattle market may be due to the thought that finished cattle prices have reached the bottom of the valley and will slowly strengthen over the next several months,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Alternatively, it may be that cattle feeders simply believe finished cattle prices cannot possibly go any lower, which places a floor on where they anticipate prices to move.”
Seasonally, Griffith says calf prices will likely come under pressure the next four to six weeks.
“The short-term disruption of the plant fire in August and early September likely delayed some feedlot placements, but a larger 2018 calf crop and generally good forage conditions in 2019 likely means that significant numbers of yearlings are still to be marketed in the fourth quarter,” explains Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments.
“The estimated 2019 calf crop is equal to 2018 levels, meaning that plenty of new-crop calves will be marketed this fall, with feeder supplies ample through 2020. It will likely be a few more months before we will see sustained year-over-year decreases in feedlot inventories.”
Fed cattle prices rally
Negotiated cash fed cattle prices built on the previous week’s gains. Live prices were $2 higher in the Southern Plains at $103 per cwt, $4-$5 higher in the Northern Plains at $106-$107 and $1-$5 higher in the western Corn Belt at $104-$105. Dressed trade was steady to $5 higher at mostly $165.
Week to week on Friday, Live Cattle futures closed an average of $3.19 higher ($1.25 higher at the back to $5.67 higher in spot Oct).
Stronger cash prices are welcome, of course, but Griffith adds, “Basis has softened, which means hedged cattle feeders are not experiencing the same gains due to lower profits in the futures market. Regardless of which situation each feedlot is experiencing, most feedlot managers are sure to be gaining optimism as deferred live cattle contracts are beginning to see price increases.
“The spring 2020 market is still several months down the road, but many of the cattle that will be coming off on the April and June live cattle contracts will soon be placed on feed. This should help support feeder cattle prices this fall.”
Although total pounds of beef in freezers (Aug. 31) were 4% more than the previous month, the inventory was 6% less than the same time last year, according to the most recent USDA Cold Storage report.
Total red meat supplies in freezers were up 1% from the previous month but down 1% from last year.
Griffith says current cold storage levels are manageable. However, he explains, “Concern could begin to creep in if meat protein production continues to increase and exports fail to materialize. It seems almost certain that more beef, pork, and poultry will be produced in 2020 than in 2019, given current inventory. Strong exports will be required to absorb this production and support prices.”
Keeping in mind there was one less weekday in the month this year, beef production in August was 2% less than the previous year at 2.37 billion pounds, according to the most recent USDA Livestock Slaughter report. Cattle slaughter for the month was also 2% less at 2.93 million head. For January through August, beef production was 1% more than the same period a year earlier at 17.96 billion pounds.