The collapsing demand for feeder cattle continues to be the key negative force for the cattle market. The market faces a cattle-on-feed report and a monthly cold storage report on Friday, but the focus has been on the sharp drop in demand to own feeder cattle with corn closing in on $8. Traders see on-feed supply on July 1st near 2.5% above last year, placements down about 2% from last year and marketings down about 6%.
News that cash cattle traded down to $113.00 this week from $115.00 last week and $118.00 the previous week is helping to pressure the market.
October cattle pushed sharply lower on the session yesterday and down to near the lowest level since June of 2011. The market came to just 25 points shy of the April 27th lows. August cattle traded moderately lower on the session, and it is trading near the June lows this morning. Another sharp break in nearby feeder cattle futures (down the limit early) plus continued weakness in the beef market on ideas of sluggish consumer demand helped to drive the August cattle to the lowest level since June 27th. Ideas that cash cattle trade could stay weak as more and more cattle are moving to the market with only 18% of the pasture and range in good to excellent condition as compared with 46% last year helped to pressure. Fears that marginal producers, cow/calf operators and Midwest feeders are all expected to unload a few more cattle on the market than normal given the drought situation and corn approaching all-time highs helped to pressure.
Slaughter came in at 128,000 head, which was higher than expected and a positive for demand. This brings the total for the week so far to 253,000 head, down from 255,000 last week at this time and down from 255,000 a year ago. Boxed beef cutout values were up 25 cents at mid-session yesterday and closed 61 cents higher at $184.45. This is still down from $188.35 one week ago.
If the western Corn Belt crop conditions continue to deteriorate, poultry, pork and beef producers will all be under the gun to cut costs and move un-needed animals.