September 19, 2006

 

Various factors to affect US cattle prices as conditions improve
 

 

Even as recent rains have improved conditions for pasture, they were too late to rebuild hay stocks to help the cattle industry, cattle analysts said.

 

Moreover, various factors come into play which may affect cattle prices. 

 

Even if winter wheat pasture is available this fall, feeder cattle prices would likely rise due to tight feeder/stocker supplies as many cattle have already been moved into feedlots, Cattle Network said. However, the improved conditions could lead to lightweight cattle placed in feedlots earlier being moved back to pasture.

 

Cow prices have increased, along with fed cattle and beef prices, despite increased supplies and lower prices from competing meats. Futures prices for fed cattle contracts through spring 2007 were well above earlier levels.

 

Still, if pastures face problems later in the year, cattle likely would be moved into feedlots and to slaughter sooner than normal.

 

For now, cow and feeder cattle prices are holding steady, supported by rain and a number of positive factors, not the least of which is energy prices, which are going downhill. Furthermore, feeder cattle supplies outside feedlots remain low.

 

However, beef cow slaughter has been well above that of the summer of 2005, possibly damping down prices.

 

With current feedlot prices, fed cattle could be breaking even or showing a small profit in September.

 

Most of the feedlot placements in July this year were cattle under 600 pounds. Cattle of this category was also 43 percent more than that in July last year and 35 percent above average levels for the past 5 years.

 

Marketings of these cattle would likely be spread over the next 6 to 8 months or longer. The longer marketing of these cattle would likely pressure prices.

 

The effects of lower retail prices and narrow retail-wholesale price spreads would eventually spread to the feedlot and farm prices, resulting in lower fed cattle and feeder cattle prices. If not a higher retail price would result.  

 

Pork production is rising seasonally into the fourth quarter while broiler production is expected to remain unchanged.

 

These competing meats, which are expected at lower prices, would pressure beef prices. However, beef production is declining seasonally into the fourth quarter, which may lend support to price increases.