After the recent summer rally, prices near term will likely struggle to hold their gains. Further out, as we typically see larger numbers, higher carcass weights and slower demand, our smaller inventories may stabilize prices enough to get us to the next seasonal rally. The basis should follow the normal trend and widen heading into late summer, but probably not to the extent seen in other years.
Feeder cattle will be limited in numbers over the next few weeks. Yearlings coming off grass will start to move by the end of August and seasonally will rally up to the peak, generally in the third quarter. Lighter-weight feeder volumes will pick up by September. This generally pressures prices as buyers have more to choose from however smaller inventories once again should support feeder prices as the fall run gets underway. Feeders will gain some added support from a strong fed price and the shrinking North American beef herd. It’s already evident that feedlots will have to reach for calves this fall. We just don’t know by how much. We’ll have to see how profitable fed sales are over the next month as well as where grain prices get to as harvest begins and the final impact of the southern drought plays out on the U.S. corn crop.
Look for stable prices in the near term as smaller kills draw down freezer stocks of ground beef during burger season. However, our higher dollar will cut into export sales, particularly as more U.S. cows are driven off scorched southern pastures. This will only reinforce the seasonal trend of fall cow prices coming under pressure as calves are being weaned and culling decisions are made.