Following last week's bearish push throughout the cattle complex, the cattle industry aims to find footing amid an uncertain and distressed time. Regardless if you focused on the live cattle or feeder cattle market, last week's happenings can simply be summarized by lower prices and heightened pressure.
As corn prices fancied $4.16/bushel and Friday's Cattle on Feed Report showed monstrous numbers of cattle on feed, the market slumped lower. Upon seeing such sharp losses during the last two to three weeks, cattlemen begin to wonder how much lower the complex must fall? DTN's Lead Analyst, Todd Hultman often says, "markets are human and humans are emotional," which seems to help answer some of the uncertainty dancing throughout the cattle complex.
Pinpointing how much is unknown versus what is concrete and certain is maddening, but focusing on the latter part of the two can help gauge where the market's true beat is at:
-- Live cattle: The live cattle market is heavily pressured from weakening boxed beef prices, ginormous carcass weights and a weak futures complex. As packers see boxed beef prices going lower (choice cuts averaged $2.71 lower last week and select cuts averaged $6.57 lower) their ambition to support the cash cattle market grows even more grim.
With carcass weights matching or surpassing 2015 levels, the market's extra tonnage continues to pressure the cattle industry. For the week ending Oct. 10, 2020, steer carcass weights jumped 4 pounds from the previous week to match the industry's highest 2015 weights; steers averaged a substantial 928 pounds, and heifers surpassed 2015 levels to hit new highs at a whopping 846 pounds (2 pounds heavier than in 2015, and up 3 pounds from the previous week). And last week alone the December live cattle contract fell $5.05 and November feeder cattle fell $5.38. Traders are fully aware of the market's shaky future and have sidelined their buying until a stronger market is found.
-- Feeder cattle: The feeder cattle market is drowning as bawling calves work their way across scales surpassing the market's current demand and consequently prices are quickly chipping away from the fall's earlier marks. Cow-calf producers are in a hard spot as the uncertainty of earlier this spring pushed producers to either market their calves this fall or hold them over until sometime in the first quarter. With wheat pasture limited and hay prices rising, cattlemen weigh out the hard decisions of gambling on feeder cattle prices come Jan. 1, versus the continuously growing expense to hold them over for that long. Also pressuring the feeder cattle market is the rallying corn market. As corn prices surpass levels yet seen in 2020, break-evens become increasing important for feeder cattle buyers. Unfortunately, cattlemen have their work cut out as the market continues to change and evolve.
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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