Since a peak in early September, feeder cattle prices have declined nearly 10 percent. Rising corn prices coupled with declines in deferred live-cattle prices has driven the market lower. Analysts believe supplies of feeder cattle will continue to be tight over the next six weeks. But demand will remain weak due to poor feedyard margins and the deferred fed-cattle basis that is nearly equal to cash prices.
Yearling feeder cattle traded last week at $103 to $104 per hundredweight, with steer calves weighing 450 pounds trading at about $126 per hundredweight. Analysts believe those prices are near the seasonal lows.
Cash fed-cattle prices last week were $93 to $93.50. But feedyards aren’t the only ones dealing with poor margins. At least two packers have announced plans to cut back on slaughter schedules beginning this week and extending through the holidays. Other packers are also considering a slow down. Their margins have been hurt as wholesale beef prices have turned lower, dropping $3 to $4 per hundredweight over the past two weeks. On a positive note, beef export demand is expected to improve next year.
Fed-cattle prices are likely to see pressure through the winter as heavy fall cattle placements are expected to boost slaughter through the winter. That, along with continued heavyweight cattle, could boost beef production by 3 to 4 percent in the first quarter of next year. Higher beef production, along with large supplies of pork and poultry, will provide the pressure for fed-cattle prices. Pressure on the fed-cattle market and higher corn prices will keep the stocker and feeder cattle markets on the defensive.