The weather over the past couple weeks has disrupted cattle marketing in a big way. Plant closures and the ability to move cattle to market was a problem; however, a weather market never really developed. A week earlier, the futures markets were stronger, and some cash cattle were fetching $180 at the fed cattle auctions. This past week, fed cattle trade was slow and some cattle traded at $174 in Texas. Other regions were holding out for more.
The light slaughter caused by the weather has brought the Choice cutout back in the $300 zone. Packers are making between $35-50 a head, which could force them to increase slaughter volumes now that they are making a few bucks. Slaughter is expected to be around 630,000 this week.
The Cattle on Feed report was what analysts expected. Cattle on feed was 2.1% higher than last year, marketings were nine-tenths of a percent lower than last year with one less marketing day, and placements were 4.5% below last year’s level.
There are plenty of market-ready cattle available, with 13% more cattle that have been on feed for more than 150 days. However, the recent weather more than likely took a lot of weight off finished cattle. We need to follow the carcass weights; the last report showed carcass weights down 10 pounds from the prior week but still 8 lbs. heavier than last year.
The boys at HedgersEdge.com have forecast the annual total cattle inventory—which comes out Jan. 31—will confirm another year of herd liquidation. They said, “The cattle inventory level for Jan. 1 is estimated at 87.4 million head, down from 89.3 million head from last year. The rate of liquidation is likely to slow this year amidst improved moisture conditions over much of the cattle grazing country. To sum up, annual beef production is expected to decline, an action especially pronounced the second half of this year as front end fed cattle supplies decline. The ambiguity and challenge will exist with total demand- domestic and export. The supply of beef and competing meats will determine the price trend for beef. While demand will determine price level.”
The southern half of the U.S. received a bunch of moisture so far this year, where they can grow winter feed. This should affect the flow of feeder cattle on winter grazing programs. Wheat grass in Oklahoma is in good shape according to Derrell Peel, Oklahoma State University Extension livestock marketing specialist. He said that they have lots of cattle on wheat, but they have had some hard freezes and may have damaged plants. It will be another month or so before those cattle come off the wheat.
Peel also said he doesn’t expect to see herd rebuilding start until 2025. The market and Mother Nature will control the volume of herd expansion. He said over the next few years he expects to see $400 five-weight calves and $300 yearlings. The cow-calf guys should have some good years ahead of them; the rest of the beef supply chain may have some tighter times ahead. He also said he expects to see fed cattle trade above $200 at some point.
Feeder cattle markets are recovering well from the fall selloff. We’re seeing lots of five-weight steers selling for over $300 at auction markets. Looking into next summer, feeder cattle futures markets were seeing the August feeder contract at $261 and October at $265, so I would say that there is some strong optimism going forward on feeder cattle. There will be fewer of them, roughly a million fewer calves.
Finished fed cattle supplies may hold the fed cattle market back for a few months until we can clear more finished cattle out of the pipeline. Winter is typically a slower beef consumption period but should pick up in April as will the market—let’s see if it is a typical year. Most analysts think the second half of the year will show us a big market.
Let’s just hope Mother Nature cooperates with a good snowpack and timely spring rains, we’ve had a lot of moisture so far and hay stocks seem to be in good supply. I would still suggest we continue to pray for rain. — PETE CROW
