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Heat takes its toll on August cattle supply

Corbitt Wall Published on 26 August 2010
The following is a summary report of the August cattle supply marketings as reported by USDA Livestock & Grain Market News.

August feeder cattle movement was seasonally light as usual, but marketing calves and yearlings late this summer was especially difficult with extremely high heat and humidity plaguing most of the central portion of the U.S. Dangerously high heat indexes caused tremendous shrink on cattle being moved to market with heat stress sapping flesh and fill conditions and even deathloss in several cases before purchases made their new destinations. Calf demand was only moderate early in August during the hottest portion of the summer, but yearling feeder cattle interest never wavered as feedyard inventories are extremely “green” and buyers continue aggressively for feedlot replacements as the finished cattle market remains brisk.

0826_wall_1Steer and heifer calves traded weak to 3 per cwt lower for the month with stocker demand waning late in the grazing season on fairly unattractive offerings, as most of the better fall-born calves were sold earlier and new-crop calves had yet to hit the market. Cow/calf producers have enjoyed ample grazing this year with mid-August U.S. pasture conditions rated 53 percent good or very good, compared to the five-year average of just 36 percent. This should allow producers to hold calves longer and market them at heavier weights, not to mention adding value by weaning - which is especially advantageous in the fall of the year when calf supplies are heavy.  The latter part of August saw slightly cooler temperatures and improved demand for calves, particularly feather- or fly-weight calves weighing under 400 pounds. Backgrounders want to accumulate these lightweights now and straighten them out before weather patterns early this fall bring about wide temperature swings and additional health challenges. Early winter-wheat grazing looks promising in the Southern Plains and handsome price levels on heavier feeders continue to support calf prices. There will undoubtedly be periods during the big calf runs in October and November when supplies outweigh demand, but contract sales of year-end calf deliveries have been at a premium.

Yearling buyers have remained aggressive right through the summer, and August prices trended fully steady to firm, despite pressure from the heat and higher feedcosts. Grain markets rallied as drought conditions near the Black Sea regions brought about the suspension of Russian wheat exports until the end of the year. This sparked limit movements (both up and down) of CBOT wheat contracts, which gained $2.50 per bushel since the conclusion of the mainstream domestic harvest less than two months ago.  Corn and soybean prices moved higher on the coattails of wheat, despite this year’s crop that is currently still on pace for all-time record yields.  Higher cost-of-gains are certain, but the cattle feeding industry’s success is not as closely tied to the corn market as it was several years ago.  Most commercial feedyards have been able to take advantage of inexpensive distiller’s by-products to give them more flexibility with their rations. Plus the extremely current state of the cattle feeding sector has given feedyard managers high-torque leverage in dealing with packers.

The direct slaughter cattle market hit triple-digits by late August with help from brisk mid-summer future delivery boxed beef sales and improved opportunities in beef export demand.  Mexico’s Ministry of Economy eliminated anti-dumping duties that have weighed on U.S. beef shipments to our top export market for the past ten years.  Packers became aggressive late in the month to fulfill obligations, which left feedlots scrounging for cattle with enough weight and finish to consider market-ready and place on the showlist. Cattle feeders have now made it through the dog days of summer, selling cattle with a limited number of days on them and looking forward to a future market that is trading progressively higher through next spring. end_mark