Cattle Inventory Drop Anticipates Bullish Market Trend

The USDA’s recent cattle on feed report, released on Aug. 18, revealed a sharp decline in inventory numbers. This decrease might pave the way for a bullish market as the industry braces for potential intense trading activities in the upcoming year and next spring.

Rich Nelson, Allendale Inc.’s chief strategist, highlighted a dip in the cattle trade before the report’s release, with losses of $2.50 for the October live contract. However, he noted optimism with the report indicating an 8% drop in July placements from the previous year. At just 1.62 million head, this is the lowest July placement seen in six years.

Additionally, the numbers for marketings of fed cattle and cattle on feed for the slaughter market also experienced a decrease by 5% and 2%, respectively, compared to 2020 figures.

While live cattle prices averaged at $178.52 per hundredweight in August, they’re projected to rise to $183.37 for December and even higher at $190.20 for April 2024.

U.S. beef exports remained stable during the first half of the year but lagged 10% behind last year’s record-breaking figures. Despite the slower export rate, Dan Halstrom, CEO of the U.S. Meat Export Federation, expressed optimism due to the steady high percentage of total beef production and sustained variety meat exports, particularly given the drop in U.S. slaughter.

Furthermore, external market factors and general economic indicators will play a vital role in influencing the beef trade, especially with the stock market witnessing a 5% decline from recent highs.