The post-Labor Day market lull should be about over in the next few weeks. The holiday rib market should be picking up as packers start hoarding ribs for the holiday season. It appears that weekly slaughter levels are stuck at 550,000 head a week; packers are seeing red ink again, losing around $160 a head.
Fed cattle markets are slower. Most fed cattle traded at $230 live and $360 dressed for the last week of September. August live cattle marketings were at a record low. The marketing rate was 14.4%. It was 16% in 2015, and the five-year average marketing rate was 17%. However, we had a record-high Choice cutout value of $413 in August.
For the first time in a while, the southern Plains feeders are selling fed cattle at par with northern Plains feeders. The lack of feeder cattle from Mexico has drastically reduced placements in the South. The Food and Drug Administration (FDA) announced they approved a new Dectomax product for treating the New World screwworm, and it appears that Mexico is going to start treating the worm with ivermectin. It will be interesting to see how these products work and if they are able to control the problem. Cattle supplies are in a dire situation. Choice beef averaged $9.85 last August, and consumers are starting to feel the pain.
The Cattle Report offered more details about the new NWS product, “The cattle markets will be absorbing two news pieces today. FDA conditionally approved Dectomax-CA1 (doramectin injection) injectable solution for the prevention and treatment of New World Screwworm larval infestations, and prevention of NWS reinfestation for 21 days. Dectomax-CA1 is conditionally approved for use only in cattle. This news may lead to an opening of the southern border to the import of Mexican cattle. The injection only has a 21-day effectiveness rating, and this will need evaluation by health professionals.
“Meanwhile Mexico is working on building a sterile fly hatchery to control the screw worm situation and the U.S. is planning on building a fly facility in Texas. It could be several years before these facilities are functioning, so be vigilant, this could take a while to solve.
“USDA has no current plans to offer payments to beef producers. Instead, Rollins said, the government will focus on freeing up land, using funding from the One Big Beautiful Bill for animal disease prevention, and hopefully inspiring the next generation of farmers.
“Rarely do we see common sense coming from the government. We applaud Secretary Rollins’ recognition of the damage government actions can deliver to the free markets. High prices in a free market are the cure for high prices. Price signals create responses from market participants and U.S. breeders are responding. East of the Rockies, the drought monitor shows the country to be in the best shape for forage in many years and with drop prices low, one can reasonably expect sharp increases in breeder heifers and coming calf crops.
“Some will remember the dairy buyout when the government decided to help milk prices by offering large incentives to dairies to liquidate dairy cows and the result was a crash to the beef markets with all the extra unexpected beef on the market. Too often government interference in free markets have unintended consequences and those consequences overwhelm the intent.”
Feeder cattle markets have been a bit erratic on the futures markets. Cash feeder cattle are selling well around $345 for yearlings. Auction market volume is picking up and should remain strong in the foreseeable future. Closeouts on cattle placed in feedlots are getting pretty thin right now, but current closeouts on fed cattle are quite good. But cattle feeders are choosing to add more weight to cattle they have rather than fill pens with replacement feeders.
Has the feeder cattle market seen its cyclical high? I think not. We are behind on marketings by about a million head and the forecast is for supplies of feeders to be even smaller next year. Placements have been behind for five straight months, and I wouldn’t expect to see Mexico to open up to feeder cattle imports any time soon; there is too much disease risk. We might even see some feedlots shut down.
The greatest threat to this cattle market is demand. Beef is at $9.85/lb., pork is at $5/lb. and chicken is at $2.50/lb., so consumers have plenty of protein choices. Government shutdowns do matter. Let’s hope this ends quickly and we can get to the point where we can slow down government spending. It must happen. — PETE CROW
