September 28, 2020







Cash Cattle


At a time when the conversation is large numbers of cattle being placed on feed, there are more recent evidence that the large placements numbers of August, reported last Friday, are becoming more moderate in the last two weeks of September. October placements, the largest placement month of the year, will be a major influence over the status of fed supplies next spring.


Sales occurred across all regions at higher prices this past week. Live sales were mostly $105 and dressed sales mostly $165. These prices are up $1-2 dollars from last week. Cattle owners were declining packer offers to extend purchases into October at today's prices. October is a delivery month and just around the corner.


Several factors are converging in support of cash prices. Boxed beef prices have surprised many who were calling for a lower direction but they have turned higher. Carcass weights fell 10# last week. The shorter supplies expected in October might be happening sooner rather than later.




Feedlots were packing cattle into pens during August leading to big number of cattle on feed at 104% of prior year. Increasing drought conditions, larger supplies of cattle outside feedyards, and improving price forecasts for the future, brought the evitable result of a large reported number of cattle on feed. Futures acted as if some got the numbers early -- with futures selling off Friday in the face of higher cash cattle prices.


The movement off summer pastures to the feedlot is often heaviest in the month of October when frost hits much of the plains grazing areas. There are only so many cattle outside feedyards. Heavier placements of the past couple months are part of the carry forward from light placements last spring. Total numbers of replacement cattle outside feedyards will not permit continuing placements to show large increases over prior year. Placements in October through year end will moderate and next year we will be finding shorter supplies outside due to the slightly smaller calf crop.

                        U.S. CATTLE ON FEED ESTIMATES
                   IN YARDS WITH MORE THAN 1,000 CAPACITY
                                                  AVERAGE            RANGE
                                   ACTUAL       OF ESTIMATES     OF ESTIMATES
CATTLE ON FEED      September           104            103.4      102.2-103.9
PLACED DURING          August           109            105.9      100.8-110.0
MARKETED DURING        August            97             96.6        95.7-97.5


Cattle Futures. Futures fell in front of a bearish COF report. Today's report lived up to expectations posting 104% on feed compared to last year. Placements jumped 9% -- well over consensus pre-release numbers of 6%.


The Comprehensive Fed Cattle Weekly Report offers the most current information on the current status of fed cattle being harvested. The report is published each Tuesday and includes the previous week's change in carcass weights and quality grading. The latest report shows carcass weights 10# lower at 887# which remains 17# over last year. The extra tonnage continues as a burden on the market and will continue through the fall. Quality grade grading was down .4 at 82.2% remaining seasonally high.


Forward Cattle Contracts:  The level of futures prices relative to breakevens is a guidepost in establishing volumes of forward sales at even given point in time. Packers have been adding to forward purchases as cattle owners find a satisfactory level to exit. Volumes in all months have increased into 2021. Most recent transactions have been $1-2 under the matching futures contract.


Weekly graphs on the Comprehensive Weekly Fed Cattle Report break down the categories of trade for the week according to 1) formula cattle; 2) negotiated live; 3) negotiated dressed; 4) and forward contracts. Some cattle included in the formula category are week to week negotiated grids and not committed cattle to one plant. Other cattle designated as formula are "over the tops".


The Cutout. Box prices were higher at week's end. Last week's slaughter number was 651,000 -- 1000 head more than last year. We not only processed more cattle than prior year, we did so with a rising boxed beef market. The choice/select spread is $12.


The decline in the value of the dollar has made our exports cheaper and imports more expensive. The dollar reached a two year low in cross currency trading. The increases in the prices of our beef will partially be eliminated by the fall in the value of the dollar.


Choice CutoutChoice Price Change
217.72Down $1.62
Select CutoutSelect Price Change
206.42Down $0.56





Beef Feature Activity Index. Retailers will turn their focus to fall features. Beef features are currently increasing as weather cools and outdoor cooking increases. Beef features are currently the top seller in many markets around the country. Retailers are currently willing to take more out front risk on owning inventory at current price levels.



Replacement markets


Stocker and feeder prices are adjusting to the larger supplies currently moving into mostly full feedyards. This will pressure the basis through October as peak supplies are brought to market. Prices are higher this week and much will depend on the success of fed cattle owners to advance prices. Large placements patterns continue threatening fed prices in the coming new year. The heaviest placement weeks of the year are in front of us. The auction receipts and feedyard placements will be closely watched for the next 60 days. Basis levels will widen during this period.


The heavy marketing months of fall are the largest of the year with both yearlings and calves moving off summer grazing locations to the feedyards. Fall also brings the largest variances in prices for all classes of cattle. Temperature changes bring herd health to the forefront. It also is a period when many ranchers try to differentiate their product based upon a wide variety of categories: 1) are the calves weaned; 2) if so, for how long; 3) vaccination regimes; 4) antibiotic and hormone representations; and 5) genetics.  Buyers parse through the list of attributes in an effort to find value and each rancher attempts to tell a story that will resonate with the buyer pool. At the extremes, this can result in as much as $20 cwt. difference in pricing.


Oklahoma City. Feeder cattle were spread as buyers match buying weights against targeted marketing months. Lighter weight yearlings were lower and heavy weight yearlings higher. Differentiation between weaned and unweaned calves spreads the pricing at the widest level of the year.


Feeder Cattle Futures. Feeder futures crashed as in the know traders bailed out of futures position prior to the monthly COF report.


Feeder Cattle Cash Index. The index is tracking the moves in cash prices.   


Forward cattle contracting. Occupancy levels at the nation's feedyards goes a long ways towards establishing the basis for trading feeder cattle. Sellers are interested in forward contracts as bids and basis levels widen. Improvement in prices has also increased forward contracting.


National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.   


Grain Futures. Grain prices opened Monday weaker and then reversed course and moving higher. Spot corn prices on the southern plains were expensive and most feedyards were waiting for harvest to open new supplies of corn to users.  Offers are more normalized for OND corn at 60-70 over the December board in Guymon, Oklahoma. Corn is now pricing into ration at $7.50 cwt. in the Oklahoma Panhandle.





The most recent COF report furnished us the numbers and now market forecasters and traders will furnish the analysis. Unfortunately, the numbers are based on surveys and while the surveys may reflect trends, they are not reflective of the actual numbers. The domestic cattle population is large and often times difficult to assess. With as many as half of the cattle owned by small producers, those numbers and profiles are little understood by the market or the larger participants in beef production.


The numbers of cattle in particular locations and the movement of cattle between locations is little understood. No one doubts the impact of drought on the cattle populations in certain areas of the country, they just don't know the exact numbers. Cattle on feed reports often fail to differentiate between grow yards and finishing yards. They can't because sometimes the owners don't know if they plan to grow or finish the cattle. Differentiation between dairy and beef cattle is often lost in the data or in the reporting formats.


We are living in a digital world and the livestock industry is operating is ignoring the value of data collection. Today a cell phone conversation discussing an upcoming fishing trip to the mountains can result in an ad on your phone advertising fishing rods. For the digital world we are all pieces of data and targets for marketing opportunities. Connecting the dots behind the scene is an everyday occurrence and the core strategy for commercial enterprises.


Beef producers are content to rely on surveys and guesses about what is happening in the beef supply chain. The processors acquire, process and plan their operations based on much better data than the live sector. They are constantly assessing feedyard occupancy, upcoming show lists, placement and more based on hard data. The buyers in the field are data acquirers.


In a digital world, every beef producers should be looking at exact numbers of cattle on feed daily, weekly or on demand. Show lists by regions by week should be available to all going forward for upcoming months. Matching those number against prior year adds context to the content. The number of cattle placed on feed should be available by day, week or month at the click of a mouse. Knowing the number of cattle on wheat in any given county in the country should be known as well as larger regional collections of data on grazing patterns and breeding numbers.


The simple and failsafe method of data collection, as advocated by this publication, is animal ID where price points, locations, and all movements would be automatically recorded. There still remains many data points possible in a world without ID. Cattle associations have access to population and movement information that can be collected and released to industry participants. The alternative to going digital is remaining mired in the past and always last to know.






Below are links to articles published in the Cattle Report pertaining to industry change. Two important changes are on the table for progress -- supply chain management and animal ID. Both applications will transform and disrupt the industry.






The Case for National ID for Cattle


Reforming the Futures Contract and Cash Trading of Cattle





Sections of the newsletter are redesigned with hyperlinks to the appropriate source pages. The hyperlinks are in light blue within the report.







Regional differences in grain and cattle basises create a difficulty in modeling a national composite for current close outs or a proforma forward look at a breakeven. Readers should consider your own area for adjustments to these models. 




The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 150 days out.  The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices and fed cattle sales are par the appropriate futures contract.

750 # Feeder Steer1,068.38142.45
Cost of Gain 600 pounds494.870.82
Estimated Interest(Prime + 1%)26.91 
Current Breakeven1,585.28117.43
Current Futures1,581.26117.13
Net Profit / Loss-4.03-0.30


The Cattle Report estimates current profit or loss on cattle placed on feed 150 days ago. This report generated from industry averages attempts to simulate a typical close out based on prevailing purchase prices for a feeder steer 150 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.

750 # Feeder Steer OKC 150 days ago975.00130.00
Cost of Gain 600 pounds492.150.82
Estimated Interest(Prime + 1%)21.33 
Resulting Breakeven1,488.48110.26
Current Texas Panhandle Cash1,416.83104.95
Net Profit / Loss-71.65-5.31



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