There are several factors playing into the current state of the cattle market, like massive losses in the Midwest, African Swine Flu (ASF) outbreaks in China and the ratification of international trade deals. Some of these factors seem like they have the potential to drive cattle trade in a positive direction, but that is not necessarily happening with this current market.
The U.S. beef herd is in its sixth year of expansion and for the most part, we have managed to offset this by increasing exports. Even so, across the board fat cattle, feeders and calves have seen a two to four-dollar dip in the last few weeks of April. The push-and-pull on the market has left U.S. cattle producers hesitant, wondering what will come next.
As a whole, the beef cattle industry doesn’t really know the full impact this winter had on cattle herds. Some have reported that Nebraska alone lost around one million head. New estimates put that number between 100,000-200,000 although still massive, that number is a far cry from original reports.
“It’s hard to get any hard numbers from those winter storms,” CattleFax Vice President of Industry Relations, Kevin Good stated.
As mentioned, the U.S. has continued to see an increase in exports even after pulling out of the Trans-pacific Partnership. The current administration is working hard for a ratified trade agreement, one more favorable to U.S. producers that better highlights our quality product.
It is important to note that U.S. beef is thought of as “pristine” on the global market. The ASF outbreak in China has caused world consumers to turn to U.S. beef to fill their animal protein demands because they know U.S. farmers and ranchers raise a reliable product that is monitored by stiff regulations.
The latest USDA Cattle on Feed Report, which was released on April 18, showed 12 million cattle and calves are currently on feed in the U.S., a 2 percent increase over April 1 of last year. This is the highest inventory since the USDA started recording in 1996. Placement into feedlots is also up 5 percent over last year, yet cattle going to slaughter is down 3 percent. This harsh winter has made putting weight on feeder cattle challenging so getting them to finishing weight has proven more difficult than usual.
The biggest question mark with the current cattle market stems from the fat and feeder cattle end. With summer and peak grilling season right around the corner, packers are busy buying cattle low and turning around to sell the beef high. Two years ago, in May, fat cattle sold for $1.47 and currently they are selling around $1.23.
It’s a trickle-down effect. If the fat cattle trade is weak, people are less likely to take risks on the feeder cattle. If the feeder cattle are low, cow-calf producers are left nervously watching the market and wondering if/when to contract. Currently five and a half weight calves are selling for around $1.80.
“The overall atmosphere in the sale barns is hesitant. Time will tell with the market, but there is going to be a reckoning,” Shayle Hildebrand, manager of Cattle Market News stated.
Experts are looking to fall as the time when the market will level out and line up and they encourage producers to hunker in and be patient. Right now, it is important for producers to stay informed and up-to-date on the goings on in the cattle market, so they can make informed marketing decisions.
“Answers will come sooner rather than later,” Hildebrand stated.