Fed Cattle Prices up $3-$4

Fed cattle prices continued to gain this week, while calf and feeder cattle demand wobbled with upward grain price momentum.

Steers and heifers sold uneven from $1 per cwt lower to $3 higher, according to the Agricultural Marketing Service (AMS).

“Demand was best for yearlings coming off grass in the Dakotas and Nebraska,” say AMS analysts. “Higher discounts than the normal trends were noted on fleshy, un-weaned calves.”

For instance, with looming seasonal calf health challenges, un-weaned light 6-weight steers sold about $10 in back of weaned counterparts in Tuesday’s sale at Ozarks Regional Stockyards in West Plains, Mo. That was on Medium and Large #1s.

“Poor pasture conditions, coupled with the increase in calf numbers coming to market, is placing downward pressure on prices,” explains Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “Many stocker and backgrounding operations in the Southeast that depend on grazing to provide some portion of the feed resources have slowed purchases because pastures have had no opportunity for fall growth.”

Drought continued to deepen in the Southeast, Southwest and Texas last week, according to the U.S. Drought Monitor. According to the most recent USDA Crop Progress report (week ending Sept. 29), 45% of the nation’s pasture and range was rated in good or excellent condition, which was 2% less than a year earlier; 25% was rated as poor or very poor, which was 2% more than a year earlier.

Incidentally, 39% of winter wheat was planted, which was 2% less than the previous year but 1% more than the average. 11% had emerged, compared to 12% last year and 13% for average.

“Producers looking to market calves over the next couple of months should not expect prices to find much footing during the fall marketing time period as the flush of cattle seasonally depresses prices, which is being further exaggerated by poor weather conditions,” Griffith says. He adds that price pressure also stems from uncertainty about corn prices, tied to late crop development and harvest-averse weather in some areas.

Except for 52 cents higher in Aug, Feeder Cattle futures closed an average of $1.13 lower week to week on Friday (45 cent lower at the back to $2.35 lower in spot Oct). Much of the pressure came from Corn futures moving higher. They were an average of 12 cents higher through the front four contracts week to week; about 24 cents higher in the last two weeks. That was in response to the quarterly USDA Grain Stocks report.

Old-crop corn stocks in all positions Sept. 1 of 2.11 billion bushels was 1% less than a year earlier, a  significantly steeper decline than the trade was expecting. Of the total stocks, 753 million bushels were stored on farms, up 22% from a year earlier. Off-farm stocks of 1.36 billion bushels were 10% less than a year ago.

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Markets weathering lost harvest capacity

Cash and futures fed cattle prices continued to increase this week as disruptions from the fire at the Tyson Foods beef processing plant in Kansas continue to wane.

“Despite the loss of roughly 5% of steer and heifer slaughter capacity, the packing industry has done a remarkable job of maintaining yearling slaughter, while total industry capacity is pushed very near to the limit,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his most recent weekly market comments.  

Peel explains weekday steer and heifer slaughter was down an average of 2% each of the first four weeks after the fire, compared to the previous year. But, slaughter totals for each Saturday were up an average of 22.3% for those same weeks.

“In total, steer and heifer slaughter in the four weeks after the fire was 2,016,178 head, an increase year over year of 12,562 head (up 0.6%). This was accomplished as a result of considerable logistical contortions and extra cost, including big Saturday kills and rerouting cattle to other plants farther away,” Peel says.

Elliott Dennis, Extension livestock economist at the University of Nebraska-Lincoln, points out uncertainty about packer ability to accommodate the void in capacity was a key driver behind increased Cattle futures volatility in the wake of the fire. As packers mostly kept up with the lost capacity, markets calmed and futures in recent weeks mostly climbed back to where they were before the fire.

“How long packers are willing and able to maintain the status quo remains to be seen as cattle on feed 120+ days is larger than a year ago and plants are already running at high utilization levels,” Dennis says in the most recent issue of In the Cattle Markets.

“The risk going forward is whether the packing industry can continue to hold slaughter rates high through the end of the year under emergency conditions,” Peel explains. “Large Saturday kills are not only more costly but cannot be maintained indefinitely. There will continue to be stresses on fed cattle demand and flows of cattle to slaughter until the damaged plant returns to operation.”

Various reports continue to suggest Tyson expects the plant to be fully operational by the beginning of next year.

“Unlike milk markets, where disruption in processing often results in milk being dumped, it is clear that no significant backup of finished cattle occurred, despite the squeeze on packing capacity after the fire,” Peel says. “Any significant backlog of more than 2 million head of slaughter-ready cattle would have pushed carcass weights up.

“However, in the four weeks after the fire, both steer and heifer carcass weights were down 4.25 pounds year over year, close to the year-to-date decreases of 4.97 pounds for steers and 5.46 pounds for heifers. Steer and heifer carcass weights are currently increasing to a seasonal peak, typically in October or November.”

CATTLE MARKET WEEKLY by Wes Ishmael

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