By Andi Anderson
The cattle market is weakening as a number of factors put pressure on prices. Slaughter rates are slowing, cattle weights are increasing, and packers are facing negative margins.
Placements of cattle in feedlots were the strongest for the year in May and June, and these are the animals that will be marketed soon. The inventory of cattle on feed over 120 days and over 150 days is high, as revealed by the most recent report.
Exports are showing a response to the record high prices in terms of drifting lower. Fed steer and fed heifer weights continue the seasonal increase and are likely to do so for the next month and a half. This weight increase is not being limited by the falling corn price and the beginning of harvest - cash corn prices are surprisingly weak.
Packer margins turned a sustained negative in August and did so again at the end of September. Prior to these two moves, margins had not been as negative since before 2019.
Finally, boxed beef composite values have finally broken lower through the $300/cwt value after an excellent summer. This is an important lower price level - a minor penetration - but below $300 nonetheless.
These factors are all pressing for a slowdown in cattle processing, sales, exports, and ultimately, prices. The next several weeks will determine the strength of cattle buying. What is needed to satisfy forward contracts and what volume can be moved through cash market retail and food service channels? We will learn that.
The strength of demand in the remainder of the four quarters will be a good signal for the following year's potential. From a long-term perspective, what happens in the replacement market during the fall will be informative too.
Cattle producers should closely monitor the market and make adjustments to their operations as needed.
Photo Credit: gettyimages-pamwalker68
Categories: Ohio, Livestock, Beef Cattle