Pasture conditions for most of cattle country have improved compared with last year; however, as of September 8, 2015, the U.S. Drought Monitor reported exceptional drought in the West and moderate to severe drought in eastern Texas. Producers interested in winter grazing, especially in eastern Texas, are likely to be carefully monitoring conditions as the drought may impact their plantings of winter wheat (U.S. winter wheat plantings can be found in upcoming USDA Crop Progress reports).

Backgrounding programs in Oklahoma and much of Texas are reportedly experiencing favorable pasture conditions, and it is likely that cattle are being held back to take advantage of the grazing opportunities. USDA’s Cattle on Feed report, released August 21, 2015, reported U.S. cattle on feed in 1,000-plus feedlots totaled 10 million head, up 3 percent compared with August 2014. July 2015 placements were 1 percent lower than in 2014-the lowest for July since the series began in 1996. The 800-plus-pound category for cattle placed on feed continues to be high, roughly 19 percent above July 2014. These cattle will likely come off feed in the near future, potentially resulting in an upswing in marketings in early 2016.

A reason for the higher cattle on feed numbers could be that producers chose to keep cattle on feed for increased periods. Feed costs are relatively low and the recently widening spread between Choice and Select boxed beef values may be providing incentives for feeding cattle to Choice grades. July 2015 marketings totaled 1.73 million head, 3 percent lower than 2014-like placements, marketings are also the lowest for July since 1996.

Third-quarter fed cattle marketings in 1,000-plus feedlots are likely to be low, as preliminary data indicates third-quarter slaughter could be below a year earlier. Fed steer prices (5-area, direct, total all grades) have fallen; nevertheless, they are above the 4-year average. The first- and second-quarter fed steer prices of 2015 hit record highs. However, July and August of 2015 showed a decline in fed cattle prices compared with 2014 prices. Packer margins were relatively weak during the summer months and packers may have slowed the pace of slaughter to improve their margins. To the extent that there is consumer resistance to the recent recordhigh beef prices (see Meat Price Spreads for monthly retail values, http://www.ers.usda.gov/data-products/meat-price-spreads.aspx), packer moves to support their margins could put downward pressure on cattle prices. USDA reduced forecasts of fed cattle prices; third-quarter prices are $144-147 per hundredweight (cwt), down roughly $10 compared with this time last year.

Oklahoma National Stockyards feeder cattle prices (KO LS 750 report, http://www.ams.usda.gov/mnreports/ko_ls750.txt) for the week ending August 31, 2015, reported medium number 1 feeder steers weighing 750-800 pounds are ranging around $206-213/cwtdown approximately $10 compared with this time last year. Like the fed cattle market, feeders are also experiencing a downward trend in the third quarter, however, the fourth quarter may see a seasonal upswing in prices.