Current crop conditions are quite favorable, and, based on current production and price forecasts, the livestock feeding scenario for the next year is more favorable than in recent years. Favorable weather has also allowed an extended grazing season for most areas. Despite the favorable crop outlook, current livestock price levels may keep positive profit margins elusive and will dampen any thoughts of inventory expansion for at least most of the next year.

Cow slaughter has picked up again, both seasonally and likely in response to the current round of Cooperatives Working Together (CWT) dairy herd retirements, but it remains below year-earlier levels. The current round of CWT dairy herd retirements are projected to be removed by early October 2009. July 2009 placements of feeder cattle in feedlots of 1,000 head or more were 13 percent higher than July 2008. However, this was likely partially due to some laterthan-usual retention on widespread good pastures, given that placements for the second quarter of 2009 were the second lowest since second-quarter 1996. In addition, increased year-over-year placements of lighter weight categories of feeder cattle in 1,000-plus head Texas feedlots was likely in response to the ongoing drought in South Texas.

Breakeven costs at or near $89/cwt for cattle marketed during September are projected higher than the preceding months because of higher feeder cattle and feed prices last spring when cattle were placed. Looking ahead, fed cattle prices, currently in the low- to mid-$80 range, are likely to barely cover costs for feeder cattle placed on feed this month (September).

July average dressed weights were above year-earlier levels, averaging 5 pounds, and were also about 7 pounds above the long-term trend for steers. Federally inspected steer and heifer dressed weights have continued to increase during the last few weeks, for several reasons. Dressed weights increase seasonally from a low in April/May because weather is generally more favorable for cattle feeding during spring and summer, which allows more feed to be utilized for growth rather than for body maintenance. In addition, a larger proportion of cattle placed in feedlots in late winter-early spring tend to be heavier, which generally results in heavier marketing/slaughter weights and, thus, heavier dressed weights.

This year, slaughter has been somewhat reduced during several of the past weeks because of packer margins, and this has resulted in at least some cattle remaining on feed longer than necessary, gaining excess weight, and also leading to larger carcasses. One sign is the increasing 5-day moving average dressing percentage accompanying the heavier 5-day moving average dressed weights, reported in recent weeks in the Agricultural Marketing Service’s Weekly National Carlot Cutout values for Choice and Select beef remain just below the 5-year averages and well below year-earlier levels. Byproduct values, which are important for determining the net returns to meatpackers, have also increased in recent weeks and are now just above the 5-year average. Retail prices for Choice beef in August 2009, at $4.22 per pound, were 1 percent above July’s $4.18 and almost 7 percent lower than August 2008’s record monthly price of $4.53. The All-fresh beef retail value in August 2009, $3.81 per pound, was almost 1 percent above July’s $3.79 and 7 percent below August 2008’s $4.09.

Source: Livestock, Dairy and Poultry Outlook, USDA