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As expected, the October Cattle on Feed report released on Nov. 17 showed a year-over-year increase in placements; however, it wasn’t as high as many anticipated and was slightly lower than September’s numbers. Regardless, the markets were already moving both in reaction to September’s numbers and in anticipation of the latest data. Those who owned long-term contracts took a major hit while the cash market has withstood the long-term implications. It appears this is another time that the contracts and cash markets aren’t agreeing with each other. The next few months will be interesting to see.
There’s a general consensus as to why markets are moving in the direction they are. Starting with Mexican cattle imports driven by drought in Mexico and high cattle prices in the U.S., placements of these cattle have helped prop up inventory levels across many of the major reporting yards. Factor that in with cattle being pulled forward domestically due to drought, prices and feedlot demand, who can blame ranchers for sending all available inventory to town after the way things have been for the last few years?
Another note from a recent conversation was new classes of cattle being brought in to fill pen space that normally wouldn’t have reached reporting yards yet. Specifically, beef-on-dairy calves helping fill the gaps that otherwise would’ve been empty this time around. Feedlots are simply trying to stay full.
A colleague told me over a year ago while everyone was waiting for this run to happen that everyone in the industry knew it was going to happen, but no one could do anything to stop it. The national cow herd just can’t sustain traditional levels. As sharp business owners, feedlot operators have taken ownership any way they can this summer. All the warning signs were there, and these operators had time to prepare. Empty pens are like empty store shelves, so they’d best have them stocked.
Although the markets and latest Cattle on Feed reports have sent some ripples through the industry lately, we still have a lot to be thankful for. Consumer demand is staying strong through the inflationary period and has held counter space. Although the shift in product preference has begun to happen, at WLJ we feel this market is poised to stay strong for an extended period of time. Even though packers have slowed their chain down trying to stack cattle up, cash markets year over year are very much in the producer’s favor and look to maintain that position until news of herd retention and expansion make headlines.
Cow slaughter levels coupled with herd liquidations are keeping the national cow herd in a continued decreasing trend. Many producers across the country decided to market what would’ve been replacement heifers. Retention hasn’t happened, which means expansion isn’t in the forecast in the near future. Supply/demand economics are in full action right now and going into 2024 should see this market level out from the recent turbulence.
Cold snaps are happening across the country and places have even been hit with early snowfall. Shipping season will be winding down in the next few weeks ahead of the Christmas holiday season. The next report will have us all ready to see how things have shaken out this fall and give a much clearer picture as we head into the new year.
For now, enjoy a resilient cash market and a wonderful holiday season. — LOGAN IPSEN
