Feed Report: Cattle market in the US
Feed Report

Cattle market in the US


USA, Lakewood, Colorado. The USDA NASS September Cattle on Feed Report was released. 2015 has displayed none of the price escalation of 2014, a persistent retreat from record-high prices, and volatility.

In 2015, and during August, fed cattle marketings have been slow and inventories have been substantial. Marketings during August were 6.1% below the prior year and cattle on feed inventories were 2.6% above the prior year.

Such an environment is only conducive to lower prices. There are plenty of cattle in the pipeline and soft movement out of showlists into meat inventories. The September report held more of the same of this behavior and the industry expected as much.

Cash fed cattle prices softened, meat discounts increased, beef retail and wholesale prices both softened, and cattle futures made substantial break. Live cattle futures have been in a downtrend for most of the summer and have recently been sitting at support levels.

October live cattle futures moved $4/cwt lower and finished at about $136. October feeder cattle moved $9/cwt lower and finished at $185.30. Cash fed cattle prices moved $4/cwt lower and cattle traded during the week at $135. The retail beef price moved $5/cwt lower which is the most substantial move down in the past several years. Discounts for Yield Grade 4 cattle increased to $11/cwt and the Choice premium – or the Select discount – narrowed to $7.

The sharp moves in prices last week are consistent with the supply and demand picture. The inventory of cattle on the showlist and long-fed cattle remains high. Cattle on feed over 120 days are about 30% above last year. Slaughter weights are nothing short of enormous. Steer carcass weights are 906 pounds, this is equivalent last year’s seasonal high, and there are still 6-to-10 weeks before the normal peak.

Untimely marketings result in big cattle and meat tonnage – and little bargaining power in the hands of feeders. Further, untimely marketings result in additional supplies in the trim and byproduct market. We see this occurring and the report communicates more of the same.

The one surprise in the report was placements into feedlots during August were 5% below the prior year and the industry expected them to be even with the prior year. Well, sort of, the average of expectations suggested even placements.

With the softening prices, packer margins have been maintained. Cash margins are currently some of the best for the year. If packers maintain disciplined buying then these margins can be maintained and the action driving fed cattle prices will be retail and food service supply and demand.

Source: LMIC


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