Perhaps the Grinch’s small heart grew a bit as cattle markets get some good news to end the year. Last Friday’s strong limit up futures trading for Live and Feeder cattle is encouraging that perhaps a bottom is in place. However, it remains to be seen what the follow-up trading will be this week. The holiday period is a difficult time to establish a new market trend and is it quite impossible to predict or even interpret market actions during holiday disrupted trading. Nevertheless, an array of good news the past few days revives Christmas hope for cattle markets.
The latest Cattle on Feed report was the most bullish in several months and is a reminder that cattle markets, especially with respect to numbers, is nowhere near as bad as recent market prices would suggest. The December 1 feedlot inventory was fractionally lower compared to one year ago. November feedlot placements were down more than expected at 89 percent of year ago levels. This is the fifth consecutive month of year over year placement declines. Only twice this year have monthly feedlot placements exceeded year earlier levels and, in fact, placements have decreased 18 of the past 21 months going back to March of 2014. November feedlot marketings were 104 percent of year ago levels. The feedlot marketing rate in November, like October, was much improved over recent months, helping to restore feedlot currentness.
On that note, the most recent week of slaughter data (week ending December 5) shows that steer carcass weights dropped 10 pounds from the previous week to 913 pounds. This is still 12 pounds heavier than the same week one year ago. Heifer carcass weights dropped 8 pounds, to 846 pounds, still 22 pounds over last year at this time. Feedlots across the Midwest and Corn Belt are struggling with wet and muddy conditions. The slaughter data does not include the impacts of recent snowfall across much of the region and cattle weights will continue to be affected in the coming weeks. Tighter fed cattle supplies and moderating carcass weights should be supportive of fed cattle markets going into 2016.
In other news, mCOOL was repealed last week eliminating the specter of retaliatory tariffs with Canada and Mexico, two of the largest U.S. beef trading partners. This removes some of the uncertainty that has contributed to cattle and beef market volatility recently. Sharply lower feeder cattle prices has resulted in a dramatic drop in Mexican and Canadian cattle imports in recent weeks. Preliminary weekly data shows that over the last four weeks, Mexican feeder cattle imports have declined 38 percent from the same period last year, while Canadian feeder cattle imports are down 91 percent from the same four week period one year ago. Additionally, imports of Canadian fed cattle and slaughter cows are also down leading to an overall 59 percent year over year decrease in Canadian cattle imports in the past four weeks.
Many cash feeder cattle auctions will be closed the next two weeks and other cash and futures trading will be limited. The holiday hiatus may provide a much needed opportunity for cattle markets to break the emotional roller-coaster of market volatility that has wrung out the market this fall. I hope everyone enjoys a very Merry Christmas.