Agricultural News
OSU's Dr. Derrell Peel says Cattle Markets Will Bounce Back
Mon, 20 Jun 2011 10:45:46 CDT
A bullish cattle on feed report capped off a week of sharply stronger cash cattle prices and futures last week, according to OSU Extension Livestock Market Economist, Dr. Derrell Peel. Fed cattle prices advanced $3-5/cwt. with most sales at the $109/cwt. level and some sales at $111/cwt. Both Live and Feeder cattle futures jumped sharply late in the week. Boxed beef held more steady trading in a narrow range and ending the week at just under $173/cwt. for Choice.
The June Cattle on Feed report included the expected decrease in May placements and also included a surprisingly strong May marketing figure. May placements were 89 percent of year ago levels and marketings were 107 percent of last year's May marketings. The decrease in feedlot placements in April was a result of limited feeder supplies and the dimming feedlot prospects marked by the slide in cash fed prices and Live cattle futures, along with prospects for higher feed prices. Strong marketings were the result of good packer margins that encouraged packers to increase slaughter rates at the same time that feedlots saw little incentive to hold cattle with the lower futures prices and cost of gain approaching the cash fed cattle price.
Have we seen the summer low in fed cattle prices? It is possible but the fed market may challenge the previous lows again in the next month, at least briefly. Previous placements ensure that seasonal fed cattle supplies will be ample through July and into August. The key, as it has been for several months, will be demand as reflected in the boxed beef price. If boxed beef prices hold at current levels or move higher, any challenge to fed cattle prices should not be too severe or long lived. From the unexpectedly strong fed prices at the current time, another test of the fed market might hold close to the $105/cwt. level. If boxed beef prices weaken pressure will increase to push fed prices lower.
Uncertainty in the fed market is a question of seasonal supply pressure relative to demand for the next two months. Beyond that the supply fundamentals will increasingly dominate through the remainder of the year. Feedlot placements are expected to remain below year ago levels for the rest of the year and feedlot inventories will drop from the June 1 level of 104 percent of last year to below year ago levels by August or September and remain lower for the balance of 2011. By the fourth quarter, beef production will decrease 5+ percent compared to last year and more than offset the slightly higher beef production in the first half the year. Annual beef production is expected to be down roughly 0.5 percent year over year with all the decrease coming in the fourth quarter of the year. Fed cattle prices in the fourth quarter may not exceed the spike highs of last spring but the average quarterly price is expected to equal or exceed the second quarter price.
Our thanks to Dr. Peel for this latest analysis of the beef cattle marketplace- it's a part of the weekly Cow Calf Corner electronic newsletter that Dr. Peel and Dr. Glenn Selk of OSU produce on most Mondays.
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