Cattle market softens with seasonal changes

2017-08-09T10:47:00Z Cattle market softens with seasonal changesBy Jeff DeYoung, Illinois Farmer Today Illinois Farmer Today
August 09, 2017 10:47 am  • 

Cattle and beef prices are likely to show some seasonal weakness as summer progresses.

Stephen Koontz, an ag economist with Colorado State University, says carcass values have fallen by more than 20 percent over the last few weeks, indicating a softening of what had been a strong market for the past three or four months.

“Larger marketings of fed cattle will happen, and fall run of the calves will start early due to dry weather in the north Plains states,” Koontz writes in his “In the Cattle Markets” column.

Placement rates have been heavy from year-ago levels, he says, and marketing numbers have been high since June. Koontz adds slaughter weights tend to move heavier in the summer.

Carcass weights are running about 1.5 percent lower than a year ago, he says.

Koontz says cattle on feed numbers for animals on feed less than 120 days indicate the large supply that will soon be on the market.

“Both of these calculated inventories are well below last year, communicating that marketings have been timely to aggressive through summer,” he says. “This will continue to hold some strength in fed cattle prices.”

He says the USDA’s latest Cattle on Feed report indicates the number of calves on feed for 90 days or less has increased sharply over recent weeks, while those less than 120 days have seen falling numbers.

“Show lists are clean, but very big numbers are coming,” Koontz says. “Marketings through August and September will determine market price dynamics from October into next year. With strong marketings then, prices will just soften through the fall.”

Koontz says if marketings slow down over the next two months, prices are likely to fall considerably.

“There is considerable downside risk for cattle and beef markets, and the cattle side especially,” he says.

Large supplies should not come as a surprise, Koontz says. Futures prices have already factored in the heavier supplies this fall.

Close attention will need to be paid to both domestic and international demand, he adds.

“Domestic demand is likely not as strong as in the spring with the elevated featuring that was done,” Koontz says. “But the world economy continues to post good news and trade volumes are surprisingly strong.

“There was some evidence in the spring that this was policy (or) trade-related ‘just in case’ buying. But it continues to persist and therefore has some fundamental justification.”

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