The continued worsening of the drought has cattle markets on the defensive in just about every respect. Loss of forage and reduced hay production is causing early feeder cattle sales and additional cow culling.
The signs of additional beef herd liquidation are everywhere; the mid-year total cattle inventory is down 2 percent while the beef cow herd is down 3 percent.
Though beef cow slaughter is down over nine percent from last year, cow culling still exceeds heifer placement and the herd continues to decline.
The market price impacts of this year's drought have developed much quickly and have been much more severe this year compared to last. Partly that is because of a more widespread drought with fewer regional options, partly because of the dramatic impacts of the drought on corn prices but also because of a significant erosion in beef values in the past month.
Notwithstanding the impact of the drought on the timing of cattle sales and on corn prices, it should be remembered that beef supply fundamentals remain tight. This should help limit drought impacts now and increase price recovery prospects later.
Of course it depends on how long the drought remains and how severe conditions get. Right now it is the drought that dominates cattle markets but later it will be beef demand, both domestic and international, that will be the key to cattle prices.
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