Friday’s monthly Cattle on Feed report should offer some overall support to the market heading into next week. March placements were 4.7% less than the previous year compared to analyst estimates ahead of the report for an increase of 1.7%
Heading into summer, analysts with the Livestock Marketing Information Center say cattle feeding profits will be challenged by seasonal declines in fed cattle prices and the pricy breakevens purchased with record-high calf and feeder cattle prices.
“Looming prospects for poor forage conditions could result in counter-seasonal increases in cow culling in coming weeks, much as happened last year in the first half of the year," says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University. "Another 2-4 weeks of delay will limit summer grazing demand and may force some producers to move defensively to ensure forage demands can be met.”
“Ten days ago, packers were short bought and now they're not,” John Otte, Penton market analyst, explained Friday. “That means they don’t need to chase supplies. That's letting cash fed cattle prices drift lower, which pressures fed cattle futures.”
The estimated acreage for corn to be planted this year was about 1 million acres less than pre-report estimates. Some analysts believe the USDA figure is too light and that there could be more downside price risk to corn.
Current weather outlooks expect drought to persist into the summer from southwest Kansas to areas south and west. “An El Niño is forecast to develop this summer or fall, which will likely bring some relief to much of this region but perhaps not soon enough to avoid additional liquidation in the first half of 2014,” says Derrell Peel, Extension livestock marketing specilist at Oklahoma State University.
Tumbling wholesale beef values pressured cattle markets this week. On the one hand, declining wholesale beef values point to tougher sledding with consumers, especially as more volume enters the market. On the other hand, spot Live Cattle futures continue to offer cash support to fed cattle.