Beef Market Advisor

Friday, August 26, 2005

Cattle Outlook

Glenn Grimes & Ron Plain,
University of Missouri - Columbia
August 26, 2005

The August 1, Cattle on Feed Report for feedlots with a 1000 head or
more one time capacity showed the numbers on feed up 2% from 12 months
earlier. Placements of cattle on feed during July were down 2% from last year
and 16% below 2003. The placement numbers in July were the smallest for this
month since the series began in 1996. Marketings of fed cattle during July
were down slightly from 2004 and 16% below 2003. Fed markets for July were
also the smallest since the series began in 1996.

The weights of cattle placed on feed in July were mixed compared to a
year earlier. The number placed on feed weighing less than 600# was down
10.1%, the number placed weighing 600-699# was up 4%, the number placed
weighing 700-799# was down 6.8% and the number placed weighing over 800# was
up 5.3%. All comparisons are with a year earlier.

The key to fed cattle prices continues to depend on demand for beef and
foreign trade. Progress is being made to get the border to Japan open for our
beef, but it is very slow.

Demand for beef at the consumer level for January through July was down
between 1 and 2% compared to 2004. Retail beef prices were up 2.4% for these
7 months but with 3% inflation and 1.3% lower consumption per capita. The
demand index for beef at the consumer level was -1.7% for January – July
compared to 2004.

Demand for live fed cattle for January - July was down between 3 and 4%
from a year earlier.

Demand for all meats other than broilers at the consumer level for
January - July was down from the same months of 2004.

Feeder cattle at Oklahoma City were steady to $2 per cwt higher and
stocker cattle and calves were $1-3 higher per cwt this week compared to a
week earlier.

The prices for medium and large farm no. 1 steers this week at Oklahoma
City by weight groups were: 400-500# $134.50-156 per cwt, 500-600# $119-139
per cwt, 600-700# calves $110-122, 500-550 yearlings $137.75-140.50 per cwt,
600-700# yearlings $118.50-122.50 per cwt, 700-800# $109.75-121 per cwt and
800-1000# $94.25-111.25 per cwt.

Even though beef wholesale prices ended the week a little lower than
seven days earlier, fed cattle prices were up for the week through Thursday
from a week earlier.

The weighted average live price for negotiated cattle at $81.75 per cwt
was up $2.66 per cwt. Weighted average carcass prices for the week through
Thursday at $128.35 per cwt were up $3.57 per cwt.

The range in live negotiated prices for the Midwest direct trade was
not available, but the weighted average was $82.00 per cwt. The range in fed
cattle prices for the High Plains was not available, but the weighted average
was $82.00 per cwt.

Slaughter this week under Federal Inspection was estimated at 661
thousand head --- up 5.8% from a year earlier.

posted by Dr. Harlan Hughes 12:40 PM [edit]

Recent Moisture Changes the Cattle Market Situation

Derrell S. Peel, OSU Extension Livestock Marketing Specialist

Widespread rains across much of Oklahoma in mid-August have sharply changed the fall forage picture for cow-calf and stocker producers. Much of Oklahoma has received nearly twice the normal precipitation in the last thirty days which has brought many areas back to nearly normal year to date rain totals. The southeast corner of the state is still significantly below normal precipitation levels for the year to date.

Warm season pastures have greened up and should provide a good growth of forage going into the fall and soil moisture conditions are much more favorable for cool season forage to green up as soon as temperatures decrease. Although it can get dry again, the recent moisture should reduce some thoughts of perhaps weaning calves a bit early in fall. Some wheat planting for forage will begin in the next few days as soon as fields dry up enough to permit fieldwork. As expected in Oklahoma during this time of year, the recent rains have pushed feeder cattle prices back up a bit and will likely keep feeder prices, especially lightweight cattle prices, steady through September. If there is to be a seasonal decrease in calf prices it should follow more or less normal patterns and decrease in October and early November. Those decreases have a good chance of being less than typical through this time period.

Meanwhile, fed cattle prices continue to struggle under soft boxed beef prices. Fed prices may have bottomed after languishing in the $79-$80 range for the past couple of weeks with late sales this week at $82. But wholesale beef values are weakening again under heavy beef tonnage and suggest that fed price recovery will be slow and limited in the coming days. The discrepancy between fed and feeder markets is becoming more sharp and a day of reckoning must be in the not too distant future. Feedlots are losing money on average and will likely do so into 2006. This will eventually pressure feeder cattle prices to come down unless demand improves in some way to permit increased boxed beef and fed cattle prices. A 750 pound steer placed on feed this week at a price of $113/cwt has a breakeven cost in late January of $91 to $92/cwt. Live cattle futures currently offers about $86/cwt for January feedlot marketings. That means that there is currently an unhedgable risk of roughly $75 per head for cattle feeding today. That also translates into risk that feeder prices will be forced somewhat lower late in the year and likely into early 2006. Pressure on heavy weight feeder cattle prices could soften calf prices late in the year if feeder prices drop significantly and for a considerable period of time.

posted by Dr. Harlan Hughes 9:56 AM [edit]

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