Cattle prices tread water

Cattle prices tread water

With grazing demand at its peak, calves and feeder cattle traded mostly steady to $5 on either side of steady this week, depending on location, weight, and buyer, according to the Agricultural Marketing Service.

Calves and feeder cattle traded mostly steady to $5 on either side of steady this week, depending on location, weight, and buyer, according to the Agricultural Marketing Service (AMS).

“Grass cattle buyers were eager bidders as the recent gains in the futures market have buoyed their confidence in the market for this fall,” explained the AMS reporter on hand for Thursday’s sale at Napoleon Livestock Auction in North Dakota, where feeder steers and heifers sold steady to $3 higher. “Cattle feeders are being much more cautious in how they chase the market, especially for cattle that will finish during the summer months.”

With grazing demand at its seasonal peak, AMS analysts explain, “Most top-quality, 600-pound steers, long-time weaned and lightly fleshed, suitable for grass, are yielding prices well north of $2.50 per pound near the major grazing regions… Demand remains very good for steer calves weighing 450-650 pounds. Most steer calves under 550 pounds are selling near or over $3 per pound, especially those under 500 pounds.… Their heifer mates are not quite as popular, trading mostly $30-$40 back, and in many cases, $50 back.”  

Cattle futures found some spark with aggressive support later in the week overriding early-week pressure.

After $1.75 higher in spot March, week-to-week, Feeder Cattle futures gained an average of $5.27.

Scattered dressed sales in Nebraska and Iowa-Minnesota through Friday afternoon were steady to $2 higher than the previous week at $258-$260 per cwt, but there were too few transactions to trend.

Live Cattle futures closed an average of $3.01 higher week-to-week (1.42 to $5.20 higher).

Choice boxed beef values trended 39¢ higher week-to-week, ending Friday at $244.51 per cwt. Select was 79¢ lower week-to-week ending Friday at $243.28.

“Boxed beef prices were stagnant this week compared to a week ago as they found little room to press forward and nothing, really, to set them back,” says Andrew P. Griffith, University of Tennessee agricultural economist, in his weekly market outlook. “Retailers and food-service participants will be gearing up for the grilling season in the near future as the unofficial start of summer begins on Memorial Day. Generally speaking, the start of grilling season results in an increase in boxed beef prices as consumers begin purchasing Choice middle meats. However, it will be interesting to see what retailers feature and what consumers purchase considering beef prices will remain at record levels and pork and poultry prices are expected to continue to decline.”

“In comparison with competing markets, the spread between beef and pork and beef and chicken remains wide, and this could leave beef at a disadvantage in seasonal consumer purchasing patterns and the mix of retail features on a weekly basis,” explain analysts with USDA’s Economic Research Service (ERS), in this months Livestock, Dairy and Poultry Outlook. “The popularity of ground beef remains intact despite ground beef prices above 2014 levels. Lean processing beef prices subsided in February but remained well above the 5-year average.”

At $6.33 per pound in January, Choice retail beef value was almost $1 higher than the same time a year earlier, according to ERS. The All Fresh retail beef price was more than $1 higher at $6 per pound.

“The undertone in the wholesale beef market remains soft but should not be confused with poor demand,” ERS analysts say. “From a historical perspective, total meat consumption tends to languish during the winter quarter but is followed by a period of increased consumption as the spring grilling season approaches. At least in the short term, packers continue to operate in the red as buyers at the wholesale level remain reluctant to significantly increase beef purchases. While wholesale beef cutout values did rally noticeably in late February as a result of reduced steer and heifer slaughter, prices have not been high enough for packers to experience a sustained period of positive margins, even though certain components of the cutout—such as 90% lean beef—remain at historical record levels.”

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Although U.S. beef and meat exports face an array of challenges, including the high U.S. dollar and trade restrictions, John D. Anderson, deputy chief economist for the American Farm Bureau Federation, offers broader perspective in this week’s In the Cattle Markets.

As a percentage of total U.S. production last year, Anderson explains beef exports were 21% of production, pork exports were 19% of production, and poultry exports were 11%. None represented a record-high level.

In fact, Anderson says U.S. meat exports, as a share of production, haven’t grown for the past couple of years.

“For 2015, USDA’s most recent forecast has exports declining for beef, pork, and chicken as a share of production as well as in total pounds. If that forecast holds, it will be the second-straight year in which exports of beef, pork, and chicken have all declined together. That has really never happened – at least not since exports became a meaningful component of these markets,” Anderson says. “Combined, beef, pork, and chicken exports in 2015 are currently forecast to decline by 485 million pounds (beef down 173 million pounds, pork down 108 million pounds, and chicken down 204 million pounds)…the combined 485 million pound drop in red meat and chicken exports will be, if realized, among the bigger year-over-year declines in the last 20 years.”

Current cattle supplies are a touch snugger than analysts thought heading into Friday’s monthly Cattle on Feed report.

The inventory March 1 of 10.7 million head was 0.5% less than a year earlier. Pre-report estimates from Urner Barry’s survey were for an average decrease of 0.4%, according to Steve Meyer and Len Steiner in their Daily Livestock Report on Wednesday.

February placements (1.52 million head) were 8.1% less, compared to the average estimate ahead of the report for a 7% decline.

Marketings in February (1.52 million head) were 2.1% les than a year earlier. Average estimates were for a decline of 2.6%.

“The average expectation for placements once again put the number very near its lowest level of the past five years,” Meyer and Steiner explain. They add it is the fourth consecutive month of fewer placements year-over-year.

With net placements the same percentage as last year’s total placements, they explained: “The number of cattle on feed for 120 days or more as of March 1 would be about 12.5% higher than one year ago. That figure would be down from 15.5% Feb. 1 but would still suggest that there are plenty of long-fed, big cattle in yards. Slaughter weights certainly support this conclusion, and we still think these animals have to show up in a surge of cattle slaughter.”

 

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