In today’s Beef Buzz, senior farm and ranch broadcaster Ron Hays speaks with Oklahoma State University livestock market economist Dr. Derrell Peel about the latest Cattle on Feed report, which showed August placements well below expectations. Peel says the numbers could signal a shift in the cattle market as fewer cattle move into feedlots.
August Placements Fall Nearly 10 Percent
Peel says August marked the second consecutive month of sharply lower placements, with the numbers coming in below even the lowest pre-report estimates. “Placements in August came in down 9.2 percent from a year ago. Marketings were down 3.3 percent. So the on-feed total came in seven tenths of a percent larger than one year ago,” Peel says.
While the total number of cattle on feed remained above a year ago, Peel says the large drop in placements changes the way that number should be viewed. “For the last three or four months, we’ve had the on-feed total above a year ago, and the only reason we did have that was because the marketings were falling faster than placements,” Peel says. “We’ve got less cattle moving through feedlots.”
With placements falling faster than marketings, Peel expects the number of cattle on feed to eventually move below year-ago levels. “I expect that we’ll get the on-feed total back below a year ago here in the next couple of months and be that way for some period of time,” Peel says. “So in this case, the market should take this as a fairly bullish report.”
Placements Fall Outside Pre-Report Expectations
The August placement number was particularly notable because it came in well below the range of analysts’ pre-report estimates. “Both the placements were actually lower than the range of pre-report estimates, and the marketings were actually a little bit bigger than the range of pre-report estimates,” Peel says. “So kind of a surprise both ways.”
Peel says the placement number was significantly below even the lowest estimate. “It’s quite a bit lower than anybody expected,” Peel says. “So I think this will be taken as a pretty bullish number for cattle markets.”
Oklahoma Auction Volumes Remain Low
Peel says the decline in placements is also reflected in cattle moving through Oklahoma auction markets.
“In Oklahoma, I do know. I watch the combined auction total every week, and since the middle of July through this last week or so, auction volumes in Oklahoma have been running between 30 and 35 percent below a year ago,” Peel says.
He says several factors may have contributed to the lower volume. “I think part of it was the hot weather, part of it was the fact that the market was in a major correction, and quite a bit depressed, and maybe there’s just less cattle out there to be marketed at this point,” Peel says.
Cattle Markets Begin to Recover
After a significant correction, Peel says cattle markets have begun to recover in recent weeks. “We are seeing these markets recover the last couple of weeks,” Peel says. “I think they have room to do that. The fundamentals are still strong. They just need a little bit of relief on some of these outside impacts that have been buffeting the market for the last six or eight weeks.”
Peel says the recovery could even push calf prices higher during a time of year when prices normally decline. “I look for this market to actually continue to improve- some of that’s counter seasonal because we’ve been down so much,” Peel says. “We might actually see these calf prices go up a little bit, and typically fall, of course, is the seasonal low for calf prices.”
Weather Could Bring Wheat Pasture Demand
Weather will also play an important role for cattle producers in the Southern Plains. Peel says cooler temperatures and moisture could create additional demand for lightweight calves if wheat pasture becomes available. “The other thing that would help, at least in the Southern Plains, if this weather changes like we’re talking about and we get some moisture, there’ll be some wheat pasture demand for these lightweight calves that we haven’t had up to this point,” Peel says.
He says producers are watching closely for a break in the summer heat and desperately needed moisture. “Everybody is really anticipating this summer finally breaking, and obviously we need the moisture desperately again from the standpoint of our pastures in general, as well as the prospects for getting any wheat planted and any potential for wheat grazing this winter,” Peel says.
Lower Heifer Slaughter Could Signal Herd Rebuilding
Peel says another piece of the cattle market that bears watching is the decline in heifer slaughter. “Heifer slaughter so far this year is down about 10.9 percent, and it’s actually down about twice as much as steer slaughter is down,” Peel says. “There’s less cattle, so all of it’s down.”
However, Peel says the pace of the decline in heifer slaughter may indicate producers are beginning to retain heifers. “The heifer slaughter is falling at a rate now where I think it’s beginning to tell us maybe that we have been trying to hold on some heifers,” Peel says.
Drought remains a concern, but Peel says the heifer slaughter data suggests herd rebuilding may already be getting started. “I’ve been concerned that the drought conditions might preempt that, but thus far it looks like maybe we’re getting started on that process,” Peel says.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR above for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
