The Enid News and Eagle, Enid, OK

July 6, 2013

Beef demand to play big role

Enid News and Eagle

ENID, Okla. — Summer beef demand will play an important role in fed cattle markets, bringing together two aspects of the industry that have been analyzing their status by different factors.

Feeder cattle markets have been focused heavily of new corn crop prospects for several weeks. Feedlots have been looking for feed price relief for the coming crop year relative to the drought-driven corn prices of the last year.

“Fed cattle markets are groping for a summer bottom amidst seasonally large slaughter and beef production,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist.

“Meanwhile feeder markets appear to have found a bottom after being on the defensive since February.”

Feedlots have taken advantage of significantly lower feeder cattle prices the last three months to increase year-over-year placements in March and April and maintain a large, though slightly down, placement level in May.

Feeder markets have been strengthening recently based on better demand, as evidenced by projected feed prices this fall and a tightening of feeder supplies. Peel said improved feed prices are expected to be offset by higher feeder cattle prices this fall.

“Strong feedlot placements the past three months have utilized the slightly larger feeder supplies indicated on Jan. 1, plus some of the heifers intended as replacements this year,” he said.

“Feeder supplies are expected to tighten considerably in the second half of the year, with reduced feeder cattle imports and a smaller 2013 calf crop.”

The possibility of heifer retention restarting again this fall could further tighten feeder cattle supplies late in the year.

Peel said fed cattle markets are most concerned with beef production and movement of animals through the feedlots this summer and fall.

“The summer low for fed cattle can occur anytime from now until Labor Day, so it is hard to call the low yet with so much of summer remaining,” he said. “Fed cattle prices will take their cue from boxed beef prices this summer, especially as the seasonal peak in beef production passes into the third quarter.”

The placement of relatively large numbers of heavy feeders recently will keep third quarter beef production higher than most industry analysts projected early in the year.

The May placements, in particular, included large numbers of very heavy feeders that will finish in the third quarter.