Cattle Futures Drop Due to Drought Conditions and Beef Imports

Cattle futures dropped last week due to several factors. The upcoming reopening of the Santa Teresa port for Mexican cattle imports added pressure, particularly on feeder cattle.

According to James Mitchell, associate professor and associate director of the Fryar Price Risk Management Center of Excellence at the University of Arkansas Division of Agriculture:

"Drought conditions continued to move cattle to market earlier than normal in parts of the country, adding some near-term supply pressure,"

Mitchell said.

The September Cattle on Feed report was released after the market closed and showed August placements were down 9% from last year and came in below expectations. This reinforced the tight feeder cattle supplies.

Cattle futures found their footing early in the week, but prices sold off throughout the week as the market looked ahead to the Sept. 24 opening of the Santa Teresa port along with crude oil prices trading in the $100 levels.

Concerning the cash market, Garret Arndorfer, hedging strategist with AgMarket.Net, said:

"Cash and futures disconnected last week. Futures sold off for most of the week, while cash held its ground and lost only a few dollars,"

Santa Teresa is the largest port for Mexican crossings, accounting for around 40% of volumes in 2024 prior to the border closing.

The USDA's Cattle on Feed Report was bullish compared to pre-report expectations. Placements dropped much more than anticipated, falling 163,000 head (9.2%) from a year ago, with broad-based declines led by a 65,000-head (13.7%) drop in Nebraska.

Cash cattle trade held up well in the face of heavy pressure on futures last week, Brian Grete, senior grain and livestock analyst with Commstock Investments said.

"Cash cattle traded mostly steady to $1 lower for the week, but some firmer bids surfaced late Friday in the Southern Plains,"

The September Cattle on Feed report may provide market support this week as it reinforces how tight feeder cattle supplies remain.

This week, the market should respond positively to the bullish news from the report and the tight supply situation, Mitchell said.

The USDA Secretary confirmed that the port in Santa Teresa, New Mexico, will be reopened to Mexican cattle imports on Sept. 24, Grete added.

"USDA is also evaluating the reopening of ports at Columbus, New Mexico, and possibly Nogales, Arizona,"

He said that initial arrivals via the port will depend on eligible cattle supplies, inspections, transportation, and how rapidly operations expand.

The USDA says that a case of screwworm was detected in Grant County, New Mexico, but this won't impact the Santa Teresa port reopening.

"USDA's Cattle on Feed Report Friday after markets had closed for the week was bullish compared to pre-report expectations,"

Placements dropped much more than anticipated, falling 163,000 head (9.2%) from a year ago, with broad-based declines led by a 65,000-head (13.7%) drop in Nebraska.

Cattle markets should respond positively, especially given heavy price pressure last week, Mitchell said.

The upcoming reopening of the Santa Teresa port for Mexican cattle imports is expected to put additional pressure on the market, particularly on feeder cattle.

The October feeder cattle futures broke a two-week streak of higher week-over-week closes, closing down $9 at $323.50 per hundredweight (cwt).

October live cattle also broke a two-week streak, closing down $3.75 at $215.93 per cwt.

Livestock markets analysts offered insight into the factors behind last week's cattle price action, highlighting drought conditions, beef imports, and weak boxed beef prices as major contributors.

The Cattle on Feed report may provide some support this week, but imports, the Mexico border, drought, and corn prices are all still creating a lot of uncertainty, Mitchell said.

This could lead to further volatility in cattle futures and cash markets in the coming weeks.

Cash cattle trade held up well in the face of heavy pressure on futures last week, with some firmer bids surfacing late Friday in the Southern Plains.