Third and fourth quarter cattle markets look up

“August is a tough time for fed cattle markets to move higher, but the market seems poised to break out from the constraints of the first half of the year as we move into the last part of the third quarter,” reported Oklahoma State University Extension Marketing Specialist Derrell Peel in a cattle market update. 

While cattle markets have oscillated throughout the past year, Peel shared the August U.S. Department of Agriculture (USDA) Cattle on Feed report, as well as current fed cattle carcass weights and the futures market, shows an optimistic view of the picture for cattle producers.  

“Auction calf and stocker prices have moved counter-seasonally higher in July and August while feeder cattle markets, which typically increase through the summer have shown a strong seasonal price increase,” Peel continued. “Cull cow prices have pulled back from summer peak prices, moving into fall seasonal declines, but remain above year-ago levels.” 

Cattle on feed 

The Aug. 20 USDA National Agricultural Statistics Service (NASS) Cattle on Feed report noted cattle placement in feedlots during July totaled 1.74 million head, with net placements of 1.68 million head, eight percent below July 2020.  The same report shared marketing of fed cattle during the month of July totaled 1.9 million head, five percent below the 2020 statistic. 

Cattle and calves on feed for the U.S. slaughter market in feedlots with greater than a 1,000-head capacity totaled 11.1 million head on Aug. 1, down two percent from August 2020.  

“Feedlot inventories continue to fall, partly seasonally, but also reflecting the cleanup of the backlog of feedlot cattle from earlier in the year,” Peel explained.  

He continued, “August represents the sixth consecutive monthly decline in feedlot inventories from the February peak, a decrease of 1.032 million head or about 8.5 percent over the six months. In the previous five years, the average feedlot inventory decline from the spring high to summer low has been 6.2 percent.” 

Carcass weights 

With what seems like a reduction of the backlog of fed cattle in feedlots, Peel said current carcass weights are an indication that feedlots are more current.  

“Steer and heifer carcass weights dropped below year-ago levels in May and continue below year earlier levels,” he explained. “Carcass weights reached a seasonal low in June, a tad later than the normal May low, and are rising seasonally into the last part of the year.” 

According to Peel, weekly steer carcass weights were 896 points, down 10 pounds year-over-year, but 18 pounds heavier than carcasses in 2019. Heifer carcasses weigh 817 pounds, which Peel reported is down 15 pounds from 2020 and 11 pounds above 2019.  

Peel shared, lower carcass weights also reflect more current impacts and incentives which follow higher costs of gain in the feedlot.  

Futures contracting 

The optimism in the cattle market is greatly reflected in the futures market, Peel shared, noting, “Live cattle futures for December are $10 per hundredweight (cwt) above current levels with an April 2022 level of $140 per cwt.”  

Cash feeder markets continue to adjust for higher feed costs, Peel said, especially in terms of lightweight and heavy feeder cattle.  

“The flattening of the price line across weights translates into higher value of gain potential for added feeder cattle weight gain,” he explained. “Increased optimism and less volatility would be greatly appreciated as cattle markets finish 2021 and look ahead to the coming year.” 

Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.