Cow/Calf Corner... Cattle Market Struggles Continue

Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

Fed cattle markets rallied early in April but have stalled again and pulled back below $120/cwt. the last week of April.  Ample supplies of fed cattle continue to hang over the market as feedlots struggle to get more current.  Meanwhile boxed beef has pushed upward with Choice values at $296.50/cwt. the last Friday in April.  Select boxed beef was $283.05/cwt. at the end of the month. 
   
Beef packers have very large margins and appear to be trying to push kills in the face of limited capacity.  Saturday steer and heifer kills for the last two weeks of actual slaughter data were both above 55,000 head, very large Saturday numbers.  Saturday steer and heifer slaughter thus far in 2021 is up 58 percent over 2020 and up more than 92 percent over 2019 levels.  The most recent data shows steer carcass weights at 898 pounds, up from 889 pounds this same week one year ago and 857 pounds in 2019.  Heifer carcass weights were 837 pounds in the most recent data compared to 823 pounds last year and 799 pounds in the same week in 2019.
   
Feed grain prices continue to push sharply higher.  The nearby May corn futures ended April at $7.40/bushel with the July contract at $6.73/bushel and the December contract price at $5.64/bushel.  Feeder cattle are being squeezed between a stagnant fed market and rising feed prices.  The pressure is weighing on feeder cattle markets with both cash feeder cattle prices and feeder futures moving lower in April.  Oklahoma combined auction prices for 450-500 lb., Medium/Large No. 1 steers dropped from $185.66/cwt. in early April to $168.88/cwt. last week.  Feeder cattle prices also dropped with 750-800 pound steer prices at $133.65/cwt. last week, down from $142.98/cwt. three weeks ago.
  
The drought situation becomes more critical each day with increasing drought eating into the growing season and diminishing pasture and hay production potential in drought areas.  The Drought Severity and Coverage Index (DSCI) currently is at 180 for the U.S. and has never been this high in April or May in any year.   National average prices for alfalfa and other hay are up year over year.  March prices for alfalfa were $181/ton compared to $172/ton last year.  Other hay prices in March were $142/ton versus $134/ton one year ago.  There are indications that beef cow liquidation is accelerating.  March monthly beef cow slaughter was up 10.2 percent year over year.  Recently weekly beef cow slaughter data in April is increasing but is difficult to interpret compared to pandemic disrupted levels one year ago.
   
Overall cattle market conditions are still expected to improve year over year in the second half of the year.  However, current challenges are somewhat more severe and taking longer to clear than earlier expected.  Market conditions are very dynamic now and the next few weeks may determine the tone of markets for the remainder of the year.
   
Dr. Derrell Peel’s analysis of drought impacts on the cattle markets on Sunup TV. Livestock Marketing 5/1/21 — SUNUP TV (okstate.edu)


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