Compared to last week, yearling feeder cattle sold 2.00-4.00 lower in the auctions with direct sales very limited due to the sharp losses on the CME cattle futures over the last two weeks.  Steer and heifer calves traded 3.00-7.00 lower with additional seasonal pressure from the approach of dog-day summer heat and the lack of available forage.  Dry conditions across the majority of the United States have sharply lowered expectations for this year’s corn and soybean crop and subsequently, new-crop grain prices have soared and the demand for feeder cattle has weakened. 

Perhaps this year’s drought is not getting near the publicity of the record dry spell across the Southwest a year ago.  But, the lack of rain is currently much more wide spread and including some of the country’s most productive farm land.  Out west and in the mountain states, producers are being forced to early-wean calves and sell-off a dramatic percentage of their cow herd.  The Torrington WY Livestock Market has seen record receipts for this time of year with a high percentage of cows/pairs and already holding weekly feeder specials which normally don’t start until September. 

The Midwest has seen spotty showers over the last few weeks, but the lack of winter snowfall and a mostly dry spring has producers suffering from central Iowa down to Arkansas.  In many ways a drought in our nation’s breadbasket is much worse than one in the arid Southwest which is accustomed to long periods with little or no rain.  Irrigation is not widespread in the Midwest and most producers depend on high yields and high stocking rates, while a drought is hard to overcome when it takes well over an inch of rain per week just to maintain normal moisture conditions. 

Corn plants are entering their all-important silking stage and many of the soybean fields have  hardly received any rain since they were planted, which is especially hard on the no-till crops that must be sprayed for weeds.  Midwestern pastures are dominated by cool season grasses that have mostly gone dormant and won’t see any regrowth until temperatures ease in the fall.  High production areas of the Eastern Corn Belt may be the driest from Illinois to Ohio where crop destruction is normally due to flooding.  Still, farmer feeder buying was prevalent at Green City, MO on Wednesday with over 600 head of top quality 800-900 lb steers selling with an average weight of 845 lbs and price of 154.27.  Fed cattle sold mostly 3.00 lower at 116.00 with feedlot leverage further eroding as formulated sales hit an all-time high of 57 percent of nationwide direct slaughter cattle sales. 

This allows packers a known captive supply and cattle feeders assured scheduling to better manage mandatory withdrawal periods of widely used late term feed additives.  Friday’s cattle-on-feed report pegged June 1st inventories at 101.7 percent of a year ago while placements and marketings were 115.3 and 100.6 percent of 2011, with all three categories having a bearish snarl.  This week’s reported auction volume included 50 percent over 600 lbs and only 40 percent heifers.