– Dr. Kenny Burdine, Livestock Marketing Specialist, University of Kentucky
The general negative trend in cattle markets has continued over the last four weeks. For the last full week of June, federally inspected cattle slaughter was estimated above year-ago levels for the first time since early April. This simply has to continue if we want to work through the backlog of cattle in the system that resulted from several weeks of greatly reduced harvest. However, I do want to put this increase in perspective. For the last week of June, slaughter was estimated to be 1.4% above 2019 levels. This compares to slaughter being down 35% from 2019 levels at its lowest point this spring and down more than 20% for five straight weeks from mid-April to mid-May. Simply put, increases in slaughter are encouraging, but it is going to take a lot of time to get caught up.
I am writing this on July 3rd, and it appears that fed cattle are going to trade around $95 per cwt for the week. Current fed cattle prices shouldn’t fundamentally impact current feeder cattle prices, but I do think the sharp drop over the last several weeks is putting a damper on prices across the board. Winter CME© live cattle futures should be driving current feeder cattle prices and they have dropped way less than cash prices, which does give me some reason for optimism as we move towards fall.
Stockyard receipts were light this week, probably due to the holiday week. But Kentucky cattle prices were down across the board. Calf prices were down again, but not by a great deal. Over the last four weeks, the state average price of a 550 lb M/L #1-2 steers is down $4-5 per cwt. This is not good news, but not all that unusual by mid-summer. Heavy feeders are a very different story and seem to be bearing the brunt of the weakness in fed cattle prices. Over the last four weeks, the state average price of an 850 lb M/L #1-2 steer has dropped by more than $10 per cwt. This is against the typical seasonal pattern making it more concerning (see Figure 1).
Figure 1:
Source: USDA-AMS, Livestock Marketing Information Center, and Author Calculations
The cull cow market was also called bit weaker this week, but prices were off by a very nominal amount. Average dressing 80-85% boning cow prices have decreased by less than $1 per cwt over the last two weeks and remain north of $65 per cwt (see Figure 2). These prices are still running about $10 per cwt above last year.
Figure 2:
Source: USDA-AMS, Livestock Marketing Information Center, and Author Calculations
As I was writing this report today, I was thinking about what short-term market signals would suggest likely improvement in our feeder cattle markets and I came up with two main indicators. First, I want to see the fed cattle market make its seasonal lows. Over the last five years fed cattle prices have made their lows in the fall, but current futures prices are pointing to a summer bottom this year. Whenever this bottom is made, I do expect a boost to the feeder cattle market. Secondly, I am looking for a clear decreasing trend in slaughter weights. Slaughter weights have been increasing counter-seasonally since spring due slaughter reductions. A reversal of this trend would be a sign that we are putting a dent in the backlog of cattle in the system.