The Cattle on Feed (COF) report had a bearish effect on cattle markets. Cattle on feed for August was 1.5 percent more cattle. Feeder cattle placements is where traders became confused; placements were 11 percent when analysts were expecting 6.7 percent. Marketings were down just 1.6 percent. We have record-high cattle on feed and a record number of cattle that have been on feed for more than 150 days. Packers will have ample supplies of overfed cattle for the next few months.
Fed cattle trade was a good hard week for negotiated cash trade. Texas feeders sold at $105 early in the week and Kansas feeders held off and received $106-107 for their cattle. Nebraska feeders sold later in the week at $105 live and $167 dressed.
Futures markets have been slowly drifting downward. The August live cattle contract was down $1.07 to $102.97 as it expired; the October contract was down 85 cents to $106.14 and December lost $1.17 to settle at $109.35. Very low volume. Feeder cattle are drifting lower as well. August lost 50 cents to $141.97, September lost 55 cents to $141.22 and October lost 77 cents to $141.15.
The folks at the Cattle Report said, “Some traders are able to gather enough information to anticipate USDA COF reports, but most participants simply watch and wonder. Someday the industry will realize that animal ID will make available instantaneous information on placements, marketings and on-feed numbers with a click of your mouse.”
ShayLe Stewart, DTN livestock analyst, comments, “It’s understandable that with Labor Day buying mostly wrapped up for major distributors, traders are worried about the boxed beef market nearing its top, and consequently the board is showing the uncertainty. There’s been a healthy trade thus far in the week, but more cash cattle are expected to trade before the week’s over. Bids are on the table in Iowa at $105, in Nebraska there’s some light inquiry and in Kansas there’s bids on the table for $104.
“Though feeder cattle contracts are still trading lower, their losses are minimal compared to how the complex was trading earlier Thursday morning. As traders continue to back away from the cattle contracts, believing that a modest correction is due, the contracts are left high and dry with no option but to scale lower.”
Beef prices continued their uptrend coming into Labor Day. There will be lots of beef featuring this week. The Choice cutout gained 9 cents to $231.54 and Select was up 15 cents to $214.26 on 110 loads. Ninety percent lean trim was trading at $228.78 and fresh 50s were at $41.18. Both trading has steadied the past couple weeks; the cow beef cutout was at $183.07.
Slaughter levels are getting stronger, but packers will back off after Labor Day. Through Thursday, packers had processed 472,000 head, which is 1,000 head over the same week last year. Packers finished up last week processing 653,000 head.
The folks at Livestock Marketing Information Center reported, “Commercial cattle slaughter was 2.918 million head for the month of July, a 0.7 percent decrease from last year but the second largest monthly slaughter for 2020 behind March (2.922 million head).
“Although cattle slaughter declined marginally from last year, commercial beef production reached its highest level for the year at over 2.4 billion pounds produced in July, a 2.6 percent increase over 2019. The growth in beef production is attributable to cattle dressed weights.
“In July, federally inspected dressed weights were 834 pounds, a 3.5 percent (28 pound) increase from a year ago. The backlog of cattle created by the pandemic has led to higher than normal dressed weights, which has bolstered beef production.”
The Cattle Report also said, “Stocker and feeder prices quickly adjusted to the disappointing COF report and bad news in the fed cash markets. Prices were sharply lower across all regions and classes of cattle. Placements patterns are continuing large for August, threatening further price declines for the balance of the year.
“Economic damage from the virus continues as a risk to price stability and beef demand. Larger supplies of feeder cattle through year end will be joined by a smaller calf crop this fall, leaving the promise of higher feeder prices for next year.”
OKC West in El Reno, OK, sold 5,563 head Tuesday and reported, compared to the week before, feeder steers traded $5-8 lower and feeder heifers sold $2-4 lower. Demand was light, quality plain to average. Cattle were in full condition. Steer and heifer calves sold with a lower undertone from last week’s plainer quality offering. Benchmark steers weighing 761 lbs. averaged $140.05.
Bassett Livestock Auction, Bassett, NE, offered 3,025 head and reported compared with the week before, 800-950-lb. steers traded unevenly steady and 700-750-lb. heifers traded $4 lower. Demand was good with several buyers and active internet bidding. Benchmark steers weighing 755 lbs. sold for $158.
Turlock Livestock Auction in Turlock, CA, offered 2,285 head in their Aug. 25sale and reported 700-800-lb. steers trading between $140-$154.50; 500-600-lb. steer calves traded between $158-174. One load of benchmark steers weighing 733 lbs. brought $153. — Pete Crow, WLJ publisher
