Search Site   
Current News Stories
Solar eclipse, new moon coming April 8
Mystery illness affecting dairy cattle in Texas Panhandle
Teach others to live sustainably
Gun safety begins early
Hard-cooked eggs recipes great for Easter, anytime
Michigan carrot producers to vote on program continuation
Suggestions to celebrate 50th wedding anniversary
USDA finalizes new ‘Product of the USA’ labeling rule 
U.S. weather outlooks currently favoring early planting season
Weaver Popcorn Hybrids expanding and moving to new facility
Role of women in agriculture changing Hoosier dairy farmer says
   
News Articles
Search News  
   
Delayed feedlot placements could lower cattle prices this fall

 
By DOUG SCHMITZ
Iowa Correspondent

KNOXVILLE, Tenn. — Although the feeder cattle market typically tends to show higher prices in the summer, delayed feedlot placements could lead to lower cattle prices this fall, according to University of Tennessee Extension agricultural economist Andrew Griffith.
“Many analysts are concerned with where feeder cattle prices may go when all the feeder cattle that are still out to pasture come to market,” he said.
“The market continues to provide backgrounding operations incentive to add weight to feeder cattle, which has resulted in producers holding them long and thus delaying those animals’ placement into the feedlot,” he added.
In their Aug. 18 report, USDA agricultural economists Kenneth Mathews and Mildred Haley said this is because “pasture conditions have improved in most of the cattle country, allowing producers to graze cattle to heavier weights.”
But Griffith said the concern of analysts over producers delaying feedlot placements has already been priced into the feeder cattle futures market, with prices over $200 in contracts later this fall.
“Many analysts are prognosticating that the price of feeder cattle will plummet this fall when many of those animals begin making their way to the feedlot,” he said. “The August contract is trading near the $214 price mark, and the subsequent contract months erode to just under $206 for the November contract.”
Griffith said, however, “It does not stop there. All 2016 contract months that are currently being traded are under the $200 per hundredweight price point, but what does that mean? It means about $120 per head less of revenue come 2016 than the current market.”
“There is no reason to panic at this point, but it does provide reason for stocker and backgrounding operations to consider risk management strategies if a favorable pricing opportunity presents itself,” he added.
At this point, Griffith said, most stocker producers haven’t purchased many cattle that will be marketed in 2016.
“However, those purchases will begin picking up come September when cow-calf producers begin setting wheels under freshly-weaned calves,” he said. “Thus, managers of stocker and backgrounding operations are encouraged to begin watching the expectation of market prices next spring so that a favorable pricing opportunity can be secured if one becomes available.
“The last thing a producer wants to do is lose money,” Griffith added, “but the next to last thing is forgo revenue that could have been secured at an earlier date.”
Griffith said fed cattle trade was up the second week in August, with asking prices holding firm at $153 on a live basis and $243 on a dressed basis, which were a little lower than last year, when prices were $154.74 live and $243.69 dressed.
“The five-area weighted average prices through (Aug. 13) were $152.73 live, up $4.25 from last week, and $239.29 dressed, up $5.54 from a week ago,” he said.
“The live cattle market continues to jump off its summer lows with strong gains again (last) week,” he added. “Current fed cattle prices generally do not support feeder cattle prices, but they may be providing some of the current price strength as deferred live cattle contracts do not appear to be pricing a stronger market.”
In his Aug. 18 pre-report analysis of the USDA’s Aug. 22 late afternoon release of its Cattle on Feed Report, Rich Nelson, chief strategist at Allendale Inc. in McHenry, Ill., said July placements – which supply the December through March slaughter period – are expected to be 4.9 percent smaller than last year at 1.48 million head, which is the smallest July placement since the current data series started in 1996.
“The USDA’s cattle feeding margin ended the month with a $214 per head loss on outgoing cattle,” he said. “This would be eight months in a row of losses. Live cattle prices fell from $148 at the end of June to $147 at the end of July.”
He said Allendale anticipates a marketing total 6.2 percent lower than July 2014. “There was one less Saturday in June 2015 versus 2014,” Nelson said.
“This caused an artificial 0.7 percent lower adjustment.”
Prior to the release of the USDA’s latest Cattle on Feed Report, Nelson also estimated total cattle on feed as of Aug. 1 would be 1.6 percent larger than last year, which is a decrease from the July 1 total that was 1.9 percent over last year.
Currently, Griffith said, the August live cattle contract through April contract is trading within a $2 range with a $7.50 per cwt. decline, moving from April to June 2016. “Fed cattle prices generally experience a fall time period peak and could easily increase 13 percent from summer lows,” he said. “Thus, it is feasible that fed cattle prices could reach $164 or higher this fall or before year end.” 
8/26/2015