Agricultural News
OSU's Dr. Derrell Peel says Cattle Markets are Past Worst Days of Summer
Mon, 08 Aug 2011 11:06:05 CDT
One definition of the dog days of summer is a hot summer day when a dog is chasing a cat down the street- and both are walking. As Oklahoma approaches a record number of 100 plus degree days, the dogs and cats are, for the most part, nowhere to be found. With several more days of 100 degree temperatures forecast, there seems to be no indication that summer is close to being over, according to OSU Extension Livestock Market Economist, Dr. Derrell Peel.
However, it is possible that fed cattle markets are past the worst of the summer doldrums. Fed prices have increased some $4/cwt from lows in late July. This retest of the seasonal lows was anticipated and it appears that the late May lows will hold as the lowest prices of the season. The market is not completely out of danger yet. Choice boxed beef prices have dropped to roughly $172/cwt, close to the June lows. This means that most of the recent increase in fed prices has come at the expense of packer margins and further increases in fed prices will depend on boxed beef price recovery. On the other hand, additional weakness in boxed beef prices could pressure fed prices lower again.
The recent decrease in boxed beef prices has been more severe for Choice meat compared to Select resulting in an unusually narrow Choice-Select spread for this time of year, about $3/cwt. This is indicative of the continued weakness of Choice meat demand and the struggles to rebuild middle meat demand.
Feeder cattle markets continue quite strong , especially given the harsh environment this summer. Calf prices have been pressured somewhat by unusual runs of early weaned calves due to drought, but are still above the May lows. Many of this fall's claves have already been marketed this summer. Heavy feeder price increased to new seasonal highs in early July and are still holding at remarkably strong levels. The rollback between calf and feeder prices is very narrow, in fact, almost zero in some cases resulting in very high stocker value of gain.
For example, the Oklahoma combined auction price this last week put 515 lb. steers (Med/Lrg, No 1) at $138.56 and 727 lb. steers at $138.05. This implies a value of gain of $1.37/lb. for 212 pounds of gain. For 825 lb. steers, the price is $132.50/cwt, resulting in a value of gain of $1.22/lb. for 310 pounds of gain. Wheat pasture prospects in the Southern Plains appear very poor at this point but the market is clearly encouraging somebody, somewhere that has forage to put stocker gains on feeder cattle.
Cull cow prices in Oklahoma have decreased roughly $8-10/cwt in the past month. The runs of cows and bulls in Oklahoma Auctions continue very large. This last week the auction total for cows and bulls was 3.5 times the volume last year at this time. There continue to be bottlenecks with many auctions unable to handle the volumes of cattle in weekly runs. Cattle trucks are booked well in advance and the cow slaughter plants have coolers and freezers bulging with recent production. The drop in cow prices appears to be mostly a logistical issue. The underlying cow beef market is still quite strong. The pressures are very regional and temporary. I expect to see some of the recent price drop bounce back as soon as the logistical bottlenecks abate somewhat.
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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