For much of this year cattle producers have been warned that increasing supplies of red meat and poultry would pressure prices. That forecast has played out over the past month as prices for all classes of cattle declined 12% to 13%.
But the mood in cattle country is decidedly different this week.
There are signs that suggest cattle markets have finally found a bottom and will move modestly higher. Positive movement began last Thursday as CME futures markets rallied for three consecutive days. That optimism was supported by Friday’s USDA cattle on feed report that found inventory numbers smaller than expected and September placements down 2% from last year.
The momentum carried over into feeder cattle and calf auctions early this week. Major auction markets reported steer calves $2 to $6 per cwt higher, and heifer calves and yearlings were called $4 to $8 per cwt. higher. Buyer demand was called good with a higher undertone for all classes.
Whether this cattle market rally has legs still depends on the industry’s ability to move increasing supplies of meat through the channels. Analysts note that total beef, pork and poultry supplies in refrigerated warehouses at the end of September were 1.6% larger than during August, and 11% higher than the 5-year average.
Coupled with increasing supplies, beef demand has slipped during 2016. The Beef Demand Index declined 5.4% during the third quarter of this year, and that is the fourth consecutive quarter over year-over-year decline.
Yet both feeder cattle and fed cattle prices should find support moving forward as supplies of market ready cattle are declining and beef prices tend to firm up as we approach the holiday season.
Turbulent Cattle Prices