Cash cattle prices moved lower again as the weather continues to stifle seasonal consumer beef demand and the typical market surge for grass calves.
“Yearling feeder cattle sold $3-$7/cwt. lower, while calves traded fully $5-$10/cwt. lower, and as much as $20 lower on un-weaned new-crop calves,” analysts with the Agricultural Marketing Service (AMS) said Friday. “Fall-calving areas in Missouri and Arkansas suffered the brunt of the losses, with severe discounts and light demand noted on fleshy bawlers.”
“Markets continue struggling to gain traction as we head into the latter half of April, which would have been difficult to project a month ago much less six months ago,” says Andrew P. Griffith, University of Tennessee agricultural economist, in his weekly market comments. “Prices were considered weak last fall and winter due to drought issues and elevated catle feed costs. Though the cattle market continues to be hampered by these issues, the more prevalent issue is the slow start to spring and warmer weather.”
When warmer temperatures finally cause grass to pop, some wonder how anxious buyers will be to take a position with fewer days to make a stocker break even.
“Wintry weather refused to relinquish its hold, with yet another round of snowstorms moving through the Rocky Mountain states and on to the Northern Plains,” AMS analysts say. “Auctions were cancelled or postponed again in places like Torrington, WY, where blowing snow halted any livestock movement. Farther north in Billings, MT, marketing was brisk and somewhat disconnected from lower markets in the Plains and the Midwest.”
Cattle futures ended the week mixed but mostly lower, hamstrung by the cattle and beef complex, as well as negative outside markets and lower commodity markets in general.
For instance, Crude Oil (WTI-ICE) was another $3.41/bbl. lower on average week-to-week.
Slowing economic growth in China, and enigmatic domestic market signals, put U.S. investors on the defensive. Week-to-week: the Dow Jones Industrial Average was 317 points lower; the broader S&P 500 was 33 points lower; and the tech-heavy NASDAQ was 88 points lower. The Dollar Index (DX-ICE) strengthened 0.403 week-to-week.
“Sharply lower prices were a continuation of the previous week’s weather-related sell-off and additional pressure from fears about the global economy and violence,” USDA analysts say. Undoubtedly, aside from the human tragedy, the Boston Marathon bombing added to the week’s negative mood.
The CME Feeder Cattle Index closed another $3.65 lower on the week at $134.53. That’s $5.74 less than two weeks earlier.
Bookended by $3.90 lower in spot April and $3.40 lower at the very back of the board, Feeder Cattle futures closed an average of $1.37 lower week-to-week.
Live Cattle futures were an average of 42¢ higher week-to-week in the nearby contracts; unchanged to 12¢ lower at the middle of the board, and an average of 55¢ lower through the back.
Wholesale beef prices continue to languish as do cash fed cattle prices. Choice boxed-beef cutout was 58¢ higher week-to-week. Select was 51¢ lower.
“Boxed-beef prices continue to be slow to pick up, as many consumers continue to leave the grills in hibernation mode due to unseasonably cool temperatures,” Griffith says. “High retail beef prices are a deterrent to the movement of beef, but cool temperatures are a major player at this time as well. Choice beef faced strong resistance at the $200 level all of last year, and it may face similar resistance this year. However, Choice prices should start strengthening within the next month as Select prices may face some pressure as processing of calf-fed animals starts to hit its stride.”
Griffith adds, “High retail beef prices, along with supply issues, could result in some interesting dynamics between Choice and Select, as some consumers may trade down from Choice cuts to Select cuts in order to continue purchasing beef. Ground beef is sure to continue receiving attention from consumers as beef prices increase.”
Atypically cool temperatures this late in the year, along with plenty of snow and rain, also has the market and some analysts questioning whether planting delays have already jeopardized hopes for a near-record number of corn acres this year.
According to the most recent USDA Crop Progress report, 2% of the crop is in the ground. That’s 14% less than the phenomenal start last year, and 5% slower than average.
“Northern states like North Dakota, which were key corn producers in 2012, currently are faced with much different conditions, including deep snow cover and prospects for flooding,” say analysts with the Livestock Marketing Information Center (LMIC). “The LMIC has already reduced its acreage by 400,000 acres, as problems in some northern states look unavoidable…”
If corn planting delays continue, more beans could be planted. Analysts with the Daily National Grain Market Summary attribute Friday’s pressure in the soybean market to that, as well as cool, wet conditions across the Midwest.
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Just maybe, part of the sluggish market pace also has to do with more cattle in the system than USDA statistics have suggested. Everyone agrees that cattle numbers continue sliding South overall. But plenty of folks are wondering how 6% more cattle could have been placed on feed in March – as Friday’s Cattle on Feed report suggests – given recent trends.
Cash fed cattle trade remained undeveloped through the week. Though not enough to establish a trend, by mid-afternoon Friday, scattered live sales were reported $1 lower in the Texas Panhandle at $126/cwt., and $1.50-$2.00 lower in Nebraska at $126. A few dressed sales in Nebraska were reported steady to $1 lower at $201-$202/cwt.
“The market continues to await the arrival of strong live cattle cash trade. Prices are generally trending upward at this stage in the game, but that trend was not evident this week,” Griffith says. “Feedlot losses continue to mount as prices continue to drop. The packers may be purchasing cattle a little cheaper, but it does not appear to be making much difference in relation to their margin as the cutout price continues to struggle. The market is sure to turn, but when it will turn is starting to become more of a mystery.”
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