Cattle in Nebraska feedlot DarcyMaulsby/iStock/Thinkstock.

Cattle markets slide as feedlot inventories increase

First half of 2017 pleasant surprise for all cattle industry sectors.

With Fourth of July beef purchases complete, wholesale beef prices have dropped sharply over the past 12 days, according to Derrell Peel, Oklahoma State University Extension livestock marketing specialist.

“Beef and cattle markets have defied gravity by staying stronger longer than most expected this spring. However, with seasonal pressure prevailing, beef and cattle markets have weakened and will likely struggle seasonally for the next six-plus weeks,” he said.

Peel explained that beef markets typically weaken during the summer doldrums -- the period of summer heat between Independence Day and Labor Day. However, he said the summer slump may be mitigated somewhat if July 4 beef sales are strong, prompting follow-up beef sales.

“Wholesale markets will likely struggle until August, when Labor Day purchases will pick up to support beef features for Labor Day, the last big grilling holiday of the summer,” he said.

Consequently, Peel said cash fed cattle prices have dropped more than $10/cwt. in the past 10 days or so. Feeder cattle prices also dropped $10-12/cwt. last week.

“Domestic and international beef demand will continue to be a key as beef supplies will undoubtedly continue to increase year over year in the second half of the year,” he said.

Peel pointed out that recently released retail meat prices showed that Choice and all-fresh retail beef prices increased from April to May. Choice retail beef prices in May were up 1.0% from last year, while the all-fresh retail beef price was down 3.9% year over year.

Year-to-date beef production in 2017 is 3.8% higher than the year-ago period, with cattle slaughter up 5.7%. However, this is being offset by sharply lower carcass weights so far this year, Peel added. Steer and heifer carcass weights are currently down 17 lb. compared to the same time last year.

“Steer and heifer carcass weights bottomed seasonally in early May and are expected to increase seasonally into the fourth quarter," he said. "However, a normal seasonal increase from current levels would still have carcass weights down significantly year over year and will continue to moderate larger slaughter numbers.”

According to Peel, the U.S. Department of Agriculture's June “Cattle on Feed” report showed another month of large year-over-year increases in May placements, which pushed June 1 feedlot inventories 2.7% higher than last year. May placements were 12.2% higher than last year, while marketings were 8.8% of last year, which Peel said is a continuation of strong marketings that began in mid-2016.

USDA reported that year-to-date feedlot placements were up 9.2% from last year, while marketings were up 7.0%. Most of the increase in May placements were cattle weighing less than 700 lb., which means that those cattle will be marketed towards the end of 2017, Peel said.

“Strong beef demand has helped make the first half of 2017 a pleasant surprise to all cattle industry sectors," he said. "Strong demand in the third and fourth quarters may help significantly, but supply pressures are likely to weigh a bit more heavily on cattle and beef markets in the second half of the year, holding markets generally to a sideways pattern for the remainder of the year.”

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