Fed cattle trade was a bit slow last week—I suppose everyone was waiting for the Cattle on Feed report or the mid-year Inventory report. Only 40,000 head had traded by mid-week and live prices ranged between $119-125 in the north. We’re in the dog days of summer.
Packers have settled into processing between 650-670,000 head a week, which they need to maintain for several more weeks. Beef prices are slowly coming down from the unusual spring high. Choice boxes at $265 are pretty good for the dead of summer and consumers are continuing to buy ground beef.
With all the talk about cattle feeders losing so much money it’s surprising they are paying more for feeder cattle. We’ve had some great tests in the market on fall-delivered calves the past few weeks. All the major video auctions have had big sales that have surprised most cattlemen. One would think the combination of lost equity and high corn prices would be producing lower feeder cattle prices, but the opposite has happened. We’ve seen 900-lb. yearlings sell for $160 and higher and the 500-600-lb. weaned calf market is trading between $180-190.
With widespread drought in the western half of the country, many cattle folks are sending calves to town. Drought is forcing early weaning, so calves will be selling lighter and for earlier. We’ve seen a lot of Montana calf contracts for September delivery when they would normally be for November. They will also be 50 pounds lighter—lots of early weaning is going on and cattle folks will be forced to cull herds hard. Hay is hard to find and expensive.
Cow slaughter is running 17 percent higher than a year ago. Dairy producers are starting to overproduce, and the liquidation of dairy cows will follow. We will have lower supplies of feeder cattle going forward.
We’re likely to see a positive Cattle on Feed report; analysts were guessing cattle on feed to be down 1 percent from last July 1, and marketings were expected to be 2.3 percent higher than last June when packers were having a tough time processing cattle. It would be the best marketing rate since 2011. Lower placements may be the big news, which is expected to be down six percent which would be the lowest number of June placements since 2016.
USDA’s National Agricultural Statistics Service also came out with pre-report estimates for total cattle inventory. The total cattle inventory is expected to be down four-tenths of 1 percent, or 511,000 head. Personally, I think inventory is much lower than that, with cow slaughter higher and replacement heifers down since the January 31 report. We’re in the down cycle of the cattle business.
The national calf crop was expected to be down four-tenths of one percent, or 35,000 head. Again, I think it will be lower. But with fewer feeder cattle available, the less chance we will have backups in the feedlots.
Wildfire has also been terribly disruptive and looks as if we may have another record-breaking fire season. The Bootleg Fire in Oregon has burnt over 400,000 acres and is in the heart of Oregon cow country. It seems that if the government is spending lots of stimulus money, they ought to spend some cleaning up our forests and saving some of our natural resources in the West. It’s terrible to see people’s lives and livelihoods go up in smoke, especially when they know help can be done at the local level with less federal government intervention—just send money, they’re pretty good at that.
Meanwhile, cattlemen in the Southern Plains are having a pretty good summer. Rain has been plentiful in many areas that have been in drought conditions for some time.
I’m optimistic about cattle prices going forward. But it’s also frustrating that the cattle business isn’t a growth industry—we’re selling more beef for more money than ever before. Mother Nature seems to be our limiting factor on production. We know the beef industry is a growth-industry—consumer demand has been excellent and exports are strong, especially to China who is our third largest export market, for now
Weather scientists are saying there is a 55 percent chance that La Niсa is moving back into the Central Pacific this fall and sticking around through winter, which typically sends moisture to the western ranges. So good luck California readers, we’re praying for rain for you. — PETE CROW
