So much for the price rally.
Calves and feeder cattle gave back a fair portion of the previous week’s gains at auction and in direct trade. Stocker cattle and calves traded $4-$8/cwt. lower as stronger corn prices and delayed grass development increased uncertainty.
Feeder Cattle futures came unwound Wednesday. By the end of the week, they were an average of $3.04 lower week-to-week. At $138.18, the CME Feeder Cattle Index was $2.09 lower week-to-week.
“Yearling feeder cattle traded weak to $5 lower on pressure from the slightly rebounding grain markets, sharply lower CME feeder contracts, and the fed cattle market’s inability (once again) to break through the $130 resistance level,” said analysts with the Agricultural Marketing Service (AMS) Friday.
Cash fed cattle traded mostly $1 lower at $127-$128/cwt. Spot April Live Cattle futures established a new contract low on Wednesday as traders fretted over the impact lingering winter weather could have on what has so far been less than robust beef demand.
“Feeder trends have been extremely volatile the last few weeks with sharp turns occurring during the middle of the weekly trading session,” AMS analysts say. “This past week, trends were slightly lower on Monday with the bottom falling out in many Tuesday markets as yet another snowstorm moved across Colorado and western Kansas before tormenting much of Nebraska and the Dakotas.”
Added pressure on the cattle complex came from the monthly World Agriculture Supply and Demand Estimates (WASDE) released Wednesday. Although the WASDE season-average corn price was lowered 20¢ lower at the mid-point ($6.65-$7.15/bu.), corn futures prices surged with estimated ending stocks lower than the trade had anticipated. The front six CME contracts were up an average of 42¢ week-to-week.
Mostly though, pressure appeared to come from estimates for increased pork production, reduced pork exports and reduced beef exports (see below).
“In all, the latest WASDE report reduced the per-capita consumption figure (beef) by 0.7% compared to its latest forecast and per-capita consumption for 2013 is now pegged at 55.7 lbs., down 2.9% compared to a year ago,” say Len Steiner and Steve Meyer in their Thursday Daily Livestock Report. “Despite the reduction in meat availability, the price response at both retail and foodservice counter has been underwhelming...”
Steiner and Meyer explain lighter carcasses and a significant reduction in cattle slaughter in the second half of this year likely account for much of the estimated 0.9% reduction in beef production this year.
The latest WASDE left unchanged the projected annual price average for fed steers at $125-$132/cwt. Third-quarter estimated average is $125-$135/cwt.; $127-$137/cwt. for the fourth quarter.
At the same time, forecast hog prices were lowered on increased inventories and expected decreases in exports for the year. Broiler prices were estimated higher based on what is termed robust demand.
Grass-stunting temperatures continue upending market plans, too.
“Beneficial moisture has fallen recently across many areas that needed it, but the relentlessly cool and cloudy conditions have pastures behind schedule,” AMS analysts say. “The Kansas Flint Hills have mostly received enough rain but very few pastures have been burned off, and turn-out dates are upon us with many leasing arrangements still hanging in limbo… There were several reported sales this week of previously purchased cattle that were expected to be turned out on pastures that did not develop or from western ranchers that normally graze their own yearlings but needed the grass to maintain their cow herds.”
Looking further into the year, Derrell Peel, Oklahoma State University Extension livestock marketing specialist, says in his weekly market comments, “…There are indications that the prolonged winter weather may be causing additional herd liquidation… Beef cow slaughter, after decreasing almost 10% in the first eight weeks of the year, is up 6.8% in the last two weeks compared to year-ago levels for the same period. This brings the year-to-date total to a meager 6% decrease compared to 2012. A decline in beef cow slaughter of more than double this rate would be required to suggest herd stabilization.”
In the Northern Plains, Peel explains part of the accelerated slaughter rate could be due to the extended winter and folks running out of hay.
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“In the Southern Plains, I am hearing anecdotal stories of cows that are showing up without a calf,” Peel says. “With drained forage supplies, producers would likely cull these cows immediately. The idea that two years of drought stress may be showing up as reduced reproductive performance in cows this spring is not at all surprising. This, combined with recent storms that may have added to calf death loss, may further reduce an already small 2013 calf crop.”
How all of this plays into ultimate heifer retention this year is anyone’s guess.
As for last week’s rally stopper, AMS analysts explain, “It’s unclear whether calf and yearling markets could have held steady if warm and sunny weather conditions had continued. Most of the industry is blaming the weather for the quick collapse, but others note there was little resistance to the lower prices with absolutely no support from the Feeder Board.”
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