Farm Talk

August 27, 2013

Cattle markets move past summer lows

Derrell S. Peel
CNHI

Parsons, Kansas — Cattle markets and boxed beef appear to have moved past the summer lows.  Wholesale beef, fed cattle and feeder cattle markets are all generally moving in the same direction, rare for this year, and certainly not all in harmony yet. The Choice boxed beef cutout has increased about $8/cwt. in the past two weeks. The beef demand index for the second quarter showed a continued slow improvement in beef demand year over year. Stronger beef exports have also helped beef values this summer. Domestic beef demand remains a concern this fall as wholesale values are expected to push back to record levels on sharply lower beef production in the fourth quarter.

Fed cattle have traded sideways most of the summer but have finally shown indications of moving higher. Fed price improvement has been limited so far and will likely remain limited as feedlot supplies will remain relatively large through September based on large placements of heavy feeders earlier. Fed prices will likely continue a slow grind higher through the third quarter. Decreased placements and fewer lightweight placements since May will lead to sharply falling feedlot supplies in the fourth quarter which should help push fed prices into the upper $120s by year end.

Feeder cattle markets have been on a nearly three month run after spring weakness halted with lows in May. Feeder prices have been helped by significant improvement in forage conditions in many areas and ever stronger prospects for sharply lower corn prices in the next crop year. Although feeder cattle prices are sharply higher for all weights, heavy feeder prices have increased relatively more than calf and stocker prices thus far. However, heavy feeders are more likely to stabilize in the coming weeks while stocker and calf prices may continue to advance some into the early fall. Falling feedlot cost of gain and good prospects for winter grazing will provide additional demand for stocker calves this fall. Renewed heifer retention is likely this fall that will further squeeze feeder supplies into 2014. £