“Feeder cattle buyers continue to battle in the ultra-competitive yearling market, especially in the Southern Plains,” said analysts with the Agricultural Marketing Service (AMS) on Friday.
Yearlings sold steady to $3 per cwt higher. There were instances of $5-$7 higher in the second half of the week, according to AMS.
A narrow and scattered calf offering wobbled ahead unevenly from steady money to $5 higher to $5 lower.
Cash fed cattle prices continued to hover and drift lower in another week of sluggish trade. Live prices were mainly steady to $3 lower at $152-$155 per cwt, according to AMS.
Although AMS analysts point out that steer and heifer slaughter is 6.7% less through the end of May, it’s also true that more fed cattle continue to trade away from the spot market.
Nevil Speer, BEEF industry analyst, pointed out recently that cattle feeders and packers increasingly rely on formula-based sales, along with forward-contracting and committing cattle to price grids, or both.
“The trend on the wholesale beef side is very similar to what’s occurring in the live cattle market,” Speer says in this week’s Industry at a Glance. “That is, weekly negotiated sales continue to decline over time. Packers (sellers in this case) and beef buyers are increasingly relying on out-front commitments. As noted in the earlier live cattle discussion, while there’s lots of grumbling about the sufficiency of a true test of the cash market from week to week, seemingly no one wants to step up and establish the market test.”
Wholesale beef values continue to seesaw with continued demand uncertainty, unable to establish footing for more than a week at a time.
“After a long period of discounting, cutout values busted out of their lower trend to close with sharp gains (on Tuesday) with Choice product closing $3.09 higher at $247.20. Select gained $4.44 to close at 240.75,” AMS analysts explained.
Although prices fizzled later in the week, wholesale beef values eked out week-to-week gains. Choice boxed beef cutout value closed $1.07 per cwt higher week-to-week at $245.72. Select was $2.85 higher at $240.42 as the Choice-Select spread continued to narrow ($5.30 per cwt on Friday).
Technical trade seemed responsible for much of the pushing and pulling of cattle futures this week. Prices also meandered with and against surges and leaks in wholesale beef value.
After 47¢ higher to $1.55 higher in the front three contracts, Feeder Cattle futures closed an average of $1.54 lower week-to-week. That included crumbling an average of $2.80 lower across the board on Friday. Live Cattle futures closed an average of 91¢ lower across the back half of the board.
“After a short-lived rally in live cattle futures earlier this week, contracts were unable to maintain par late in the week and essentially lost all they had gained,” explains Andrew P. Griffith, University of Tennessee agricultural economist, in his weekly market comments. “The movement of futures contract prices put a damper on the expectations of cattle feeders as the declining market forced them to moderate asking prices and ultimately market cattle on a weaker market than expected.
“The pressure cattle feeders are dealing with will likely continue through the dog days of summer, which will continue to result in red ink. Cattle feeders will grow weary of negative returns, which will force their hand in some manner. They will likely continue holding cattle on feed longer, which may help, but at some point they will call on the feeder cattle producer, which will tighten margins for backgrounding operations.”
Looking a little further ahead toward fall, analysts with the Livestock Marketing Information Center (LMIC) say in their latest Livestock Monitor that slaughter data so far this year continues to suggest beef herd expansion.
According to AMS data, LMIC analysts explain that year-to-date (through May 23) Federally Inspected cattle slaughter was 7% less than the same period last year. Steer slaughter was 5.8% less in that same stretch; heifer slaughter was 11% less.
“This is an extremely large reduction (heifer slaughter) which points towards cattle producers aggressively retaining heifers to grow the beef herd,” Griffith explains. “The take-home to the female slaughter data is that continued heifer retention will continue to tighten the near-term feeder cattle supply, but the increased heifer retention and the slower marketing of mature cows will bring a boon of feeder cattle to the market in the next couple of years.”
You might also like: