We hope everyone has a great Labor Day weekend, which is one of the big beef eating holidays of summer. Packers were trying to produce more product for the big weekend but will slow down through most of September; it’s a seasonal thing that is predictable. Packers are making a little money right now, about $40 per head, however, the beef cutout value will find a seasonal low soon.
Packers were buying cattle for a short week and there was no fed trade as of Wednesday last week. Most trade was expected to be late in the week. The August live cattle futures contract will more than likely converge when it goes off the board, then we turn to October, which doesn’t look very good. It’s currently trading at about $178.62.
The latest Cattle on Feed report was deemed bearish. On-feed numbers were 100.3% of last year and marketings were 107.7% of a year ago, with two extra slaughter days. The big surprise was placements at 105.8% higher. Sometimes I think the government messes with the numbers to bring prices down, like the recent jobs report that was revised down 818,000 jobs, the largest revision since 2008.
Front-end fed cattle supplies are still high but are expected to decline by November. But carcass weights are expected to get larger. USDA was expecting beef production to be down 8% in August. USDA pegged beef production for 2024 at 26.803 billion pounds, an 81 million-lb. increase from their July forecast, which was just nine-tenths lower than 2023 levels. Many more heifers are being fed out, higher carcass weights and an uptick in lean beef imports all contributed.
For the first half of this year, 3.313 million cows were slaughtered, down 546,000 head from last year. Carcass weights were also up on cows, about 10 lbs. Cow slaughter is also expected to be down even more through the balance of the year, and USDA is expecting to see cow slaughter down again next year. And they are already forecasting total beef production to be down 1.3 billion pounds in 2025. Maybe we will have some new folks doing the counting next year.
The boys at HedgersEdge.com said, “As the summer of 2024 nears an end, a seasonal cash flow is likely developing. Fed cattle price support at $180-182 should begin to attract buyers. A correction to this level would comprise a 5% correction from the July high. A price retreat to $180/cwt would still allow the major uptrend to remain intact. The front-end fed cattle supplies project to decline below the prior year by February, provided monthly harvest levels are achieved. Peak front-end fed cattle supply relative to last year is projected to occur by November. The seasonal decline in this category of cattle beginning during November will exceed the prior year and the previous five-year average.
“The feeder and calf supply outside feedyards on Aug. 1 is projected at 1.020 million head below year-ago levels. Declining monthly placements are likely to reduce that drop for the balance of this year. A hazard to this prospect is any expansion and/or more serious deepening of drought in the region. An area of light-to-moderate drought has spread to the south-central Plains and into the area west of the Rocky Mountains. Approximately 21% of the cattle inventory is in an area experiencing drought. On a positive note, the areas of extreme drought remain below year-ago levels per the Aug. 20 report from the NOAA.”
Cow herd rebuilding doesn’t look like it’s struggling and may not for a while, according to CoBank’s recent report. They were saying the value of heifer calves is too high to consider making replacement heifers. It will take two years’ investment to get them in production and after two years of high-priced hay and other costs, producers’ financial situations may not be ready to do without the extra cash flow. The report suggests that it may take three to five years to rebuild the nation’s cow herd. So, you western cow folk, keep praying for rain. — PETE CROW
