Kentucky Beef Cattle Market Update for October 1

– Dr. Kenny Burdine, Livestock Marketing Specialist, University of Kentucky

The volatile fed cattle market appears to be on another upswing as the 5 market average slaughter steer price came in around $105 for the last full week of September. Fed cattle prices started the year in the mid- $120’s and dropped to the mid-$90’s in spring, and again in summer. Seasonally, fed cattle prices tend to improve during the fall and CME© feeder cattle futures are fully supporting this. At the time this was written, April live cattle futures were trading at a $9 per cwt premium to October.

Cattle slaughter is still running within a couple percent of last year and signs continue to suggest that feedlots have worked through a lot of their backlogged inventory. After rapidly increasing this spring, the September cattle on feed report suggested cattle on feed over 90 and 120 days is now around last years’ levels. Feedlot placements have been running higher the last couple months and a large share of placements are of cattle weighing more than 700 lbs, which would suggest more placements of cattle that were backlogged outside of feedyards. Getting a lot of heavy feeders out of growing programs, and on feed, is very important for our fall calf market.

Prices of heavy feeders in KY did pull back about $1 per cwt for the month of September. Figure 1 below shows monthly prices for 850 lb M/L #1-2 steers on a state average basis. These prices are $5-$10 per cwt behind what groups are selling for. With the April live cattle board in the $116 to $117 range, I think heavy feeders can hold through the month of October. After about that time, heavy feeders will be selling on a lower-priced summer live cattle board and I expect prices to drop.

Figure 1: 850 lb Medium / Large Frame #1-2 Steers
Kentucky Auction Prices ($ per cwt)

Source: USDA-AMS, Livestock Marketing Information Center, and Author Calculations

This has been a bizarre calf market as there has been virtually no seasonality. On a monthly state average basis, 550 lb steer calves have traded between $142 and $148 all year (see figure 2). COVID took out our spring price increase that usually comes from grass demand and the calf market has held reasonably well through early fall. Market reporters noted stronger demand for weaned and preconditioned calves as we move into a time when changing weather patterns tend to lead to increased health problems. I expect continued incentives to sell weaned calves this fall.

Figure 2: 550 lb Medium / Large Frame #1-2 Steers
Kentucky Auction Prices ($ per cwt)

Source: USDA-AMS, Livestock Marketing Information Center, and Author Calculations

Finally, producers are likely already aware that another round of Coronavirus Food Assistance Program (CFAP) payments have been announced. For CFAP 2.0, cattle producers can receive payments of $55 per head on eligible inventory on a date they choose between April 16 and August 31. While breeding stock is not eligible for this payment, spring calving cow-calf operations should receive payments on spring born calves and fall calving operations can receive payments on any fall 2019 born calves that were held past April 15. Payments will also be received on cattle in growing programs such as stocker and backgrounding operations. Finally, my understanding is that bred heifers are eligible for this payment as females are not considered breeding stock until after they have their first calf. Signup is very similar to CFAP 1.0 and handled through local USDA Farm Service Agency offices.