Beef marketing

Cattle prices continue stronger than last year

Calves and feeder cattle sold from $2 lower to $3 per cwt higher, according to the Agricultural Marketing Service. Cash fed cattle trade was mainly $2 lower on a live basis at $128 per cwt. Dressed trade was steady to $1 lower at $204-$205.

Markets continued on mostly solid footing this week, although the sudden and steep drop in cattle futures at midweek added to wariness of increasing cattle and beef supplies.

Calves and feeder cattle sold from $2 lower to $3 per cwt higher, according to the Agricultural Marketing Service (AMS). Part of the pressure stemmed from winter weather and an ice storm that curtailed receipts and demand at some auctions in the Southern Plains and parts of the Midwest.

Feeder Cattle futures basically gave back about what they gained the previous week, closing an average of $3.44 lower week to week on Friday ($2.82 to $4.02 lower).

More feedlot placements than the trade expected (see below) will likely add to uncertainty at the beginning of the coming week.

The hard break in futures prices on Wednesday enticed some cattle feeders to pull the trigger early, while the recent jump in wholesale beef values encouraged packers to do the same.

Choice boxed beef cutout value was $8.49 higher week to week on Friday at $218.37 per cwt. Select was $7.70 higher at $212.82.

Cash fed cattle trade was mainly $2 lower on a live basis at $128 per cwt. Dressed trade was steady to $1 lower at $204-$205.

Live Cattle futures closed an average of $1.76 lower week to week on Friday ($1.07 to $2.80 lower).

Prices remain higher than last year

Compared to last year, cattle and beef prices continue at a significantly stronger pace.

For instance, year to year, steers weighing 500-600 pounds were from $23.82 per cwt higher in the Southeast region to $25.59 higher in the South Central region. That’s according to the National Weekly Feeder and Stocker Cattle Summary from AMS. Steers weighing 600-700 pounds were from $22.47 per cwt higher in the South Central region to $29.33 higher in the North Central.

Likewise, fed steers averaged $123.35 per cwt. in January of this year (Five Area monthly), compared to $119.99 a year ago.

Beef prices continue higher, too. Choice boxed beef cutout value on Friday was 11.3% higher year to year. Select was 10.4% higher.

“In January, Choice retail beef prices were $575.8 per cwt, down from December but 1.7% above one year ago,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “All fresh retail beef prices were $560.4 per cwt., up 2.0% year over year. This despite the fact that per capita beef consumption was up 2.4% year over year in 2017.”

Headwinds ahead

Although markets are off to a strong start this year, Peel cautions that plenty of challenges remain.

“Beef production, already up over 3% so far this year, is expected to be up 4.5-5.0% for the year,” Peel says. “Increased beef production will result from increased cattle slaughter and likely higher carcass weights. Feedlots are carrying larger inventories of feedlot cattle into the year and the 2% increase in the 2017 calf crop ensures that feeder numbers will continue to grow in 2018.”

So far, frozen beef inventories continue to reflect increased active product movement rather than stockpiling. Although total pounds of beef in freezers Jan. 31 were 2% more than the previous month, they were 7% less than the previous year, according to the monthly USDA Cold Storage report issued Friday. However, frozen pork supplies were 16% higher month to month and 8% more than the previous year. That left total red meat supplies 9% more than the previous month and 1% more than the previous year. At the same time, total frozen poultry supplies were 4% more than the previous month and 12% more than the previous year.

Peel points to several supply and demand factors that will be critical as the year unfolds.

“Carcass weights will be the key to just how much supply pressure will affect beef markets in the coming year,” Peel says. “Currently, average cattle carcass weights are higher year over year as a result of heavier heifer and cow carcasses; with steers about equal to last year. Carcass weights are likely to bounce back some from last year’s sharp drop, but just how much will determine total beef production. Along with increased beef production, growing pork and poultry production will result in record total U.S. meat production in 2018 adding to the supply challenges for all meat industries.”

As well, uncertainty surrounding trade policy hangs over the industry.

“Decisions regarding the North American Free Trade Agreement and the United States-Korea Free Trade Agreement could have a major impact on meat trade and U.S. cattle and beef markets,” Peel explains. “Simmering trade tensions between the U.S. and China could have ripple effects across many agricultural markets. U.S. macroeconomic and global economic conditions, generally, could rise up to be a more prominent factor in beef markets. Recent volatility in the stock market is a reminder that external factors can jump up quickly and may impact agricultural markets. Interest rates are likely to rise faster and more in 2018.”

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