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Peel: Optimism in the cattle market is growing towards the fourth quarter

August is a difficult time for the fed cattle markets to move higher, but the market appears poised to break the pressures of the first half as we move into the latter half of the third quarter.

Meanwhile, auction calf and stocker prices rose against the season in July-August, while forage cattle markets, which usually rise in summer, saw sharp seasonal price increases over the course of the summer. The prices for cattle for slaughter have moved back from the peak prices in summer and have turned into seasonal declines in autumn, but remain above the level of the previous year.

The August USDA Cattle on Feed report put July feed placements at 1.739 million, 91.9 percent last year, and July marketing at 1.9 million, 95.5 percent last year. On August 1, a total of 11.074 million cattle were fed, 98.1 percent of the 2020 level.

The feed stocks continue to decline, partly due to seasonal factors, but also as a result of clearing up the stock farming residue from earlier in the year. August marks the sixth consecutive monthly decline in feedlot inventory from its February peak, down 1.032 million, or 8.5 percent over the six months. Over the past five years, the average decline in feedlot stocks from the spring high to the summer low has been 6.2 percent.

Carcass weights give more indications that the feedlots are getting more current. The weight of ox and heifer carcasses fell below the level of the previous year in May and is still below the level of the previous year. Carcass weights hit a seasonal low in June, a little later than the normal May low, and continue to rise seasonally into the last half of the year. Most recently, the weekly weight of the ox carcasses was 896 pounds, 10 pounds less than last year but still 18 pounds heavier than 2019.

The carcass weight of heifers is currently 817 pounds, 15 pounds less than last year but 11 pounds more than in 2019. In addition to making the feedlots more up-to-date, lower carcass weights also reflect the impact and incentives resulting from the sharp rise in feedlot profit costs. This should help keep carcass weights under control over the coming months.

The optimism of the cattle markets is clearly reflected in the futures markets. Live cattle futures for December are $ 10 / cwt. above current levels with an April 2022 level of $ 140 / cwt. Feeder cattle futures have been strong this summer and are even higher this fall. Indeed, the weak base for fodder cattle in June and July suggests that futures optimism was slightly ahead of the realities of the cash market.

The markets for cash feeder cattle continue to adapt to higher feed costs, partly in view of the general price level but especially the relative prices of light and heavy feeder cattle. The flattening of the price line across the weights leads to a higher value of the profit potential for an additional weight gain of fodder cattle. Increased optimism and less volatility would be very desirable as the cattle markets come to an end in 2021 and look to the coming year.

In the Sunup TV Livestock Marketing segment on August 14th, Dr. Peel about packaging capacity problems and labor shortages. Livestock marketing 08/14/21 – SUNUP TV (okstate.edu)

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