In the Midwest and Northern Plains, where feeder cattle had good receipts, analysts with the Agricultural Marketing Service (AMS) say buyers were aggressive in getting ready for spring pastures. There were instances of $6-$8 per cwt. for yearlings in these areas, while the overall market was mostly firm to $5 higher.
“Longtime-weaned and fully vaccinated, froze-out short yearlings that are showing a bit more age than size, along with feeders that are thin-fleshed and empty, usually fit the bill. By the time green grass gets here, these types of feeders will be long gone, so buyers are collecting them while they are available,” AMS analysts note. “Trading was most active on feeders weighing 550-850 pounds, with lightweight calves narrowly tested nationwide but trading mostly steady to $5 higher in the Southeast.”
Winter weather curtailed auction receipts across wide swaths of the country, including unusually paltry trade at major markets like Oklahoma National Stockyards and Joplin Regional Stockyards.
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Though volatile, Feeder Cattle futures gained an average of $7.30 across the board week-to-week ($4.80 to $8.57 higher).
“The cattle complex is still very volatile to get too comfortable in thinking that cattle futures have bottomed and will continue higher,” AMS analysts explain. “The bears came back out on Tuesday of this week and pulled back after some impressive gains, but stormed back on Wednesday with limit-higher moves in Feeder Cattle contracts with continued gains through Friday.”
Part of the bullishness in cattle futures on Friday may have stemmed from better-than-expected employment numbers. According to the U.S. Bureau of Labor Statistics, the nation’s unemployment rate declined to 5.5% with 295,000 new jobs added in February. Major U.S. financial indices declined sharply on the news, presumably because it increases the odds that the Federal Reserve will increase lending rates in June, rather than wait until later.
Other than $1 higher and 50¢ lower in the last two contracts, Live Cattle futures closed an average of $2.64 higher week-to-week ($1.85 to $3.25 higher). That was despite cash fed cattle trade remaining mostly non-existent through Friday afternoon. In late trade, according to various reports, packers paid $2.00-$2.50 per cwt. more on a live basis and $3-$4 more in the beef.
“Packers are continuing to manage harvest rates and artificially create a short supply of beef, which has allowed them to artificially support the cutout price,” explains Andrew P. Griffith, University of Tennessee agricultural economist. “Packers will continue managing harvest rates to support cutout prices as the USDA’s All Fresh retail beef price averaged $6 per pound for the first time.”
For all of the naysayers and hand wringers, there continues to be positive news that can bolster domestic consumer beef demand. For instance, the National Restaurant Association’s Restaurant Performance Index (RPI) remained elevated in January, buoyed by higher same-store sales and traffic and a positive outlook among restaurant operators. That makes 23 consecutive months of an RPI above 100.
Although wholesale beef values lost some of their recent steam on Friday, they closed fairly steady week-to-week. Drop value was sharply higher week-to-week (41¢ higher) closing Friday at $14.52 per cwt.
“Margins for beef packers have improved from recent negative levels, a factor some see contributing to expectations for steady prices in the cash markets,” explains John Otte, Penton market analyst. “The latest HedgersEdge packer-margin index was $9.55 per head on Thursday, compared with $14.35 per head on Wednesday.”
However, Otte also explains, “Cattle face drag from the growth in pork supplies. Poultry production, too, has picked up amid the cheapest feed costs in years, a factor that has led some industry experts to believe meat cases later this year could be filled with chicken and pork, which are both comparatively cheaper than beef.”
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