“Extremely tight supplies of available feeder cattle could no longer hold the inflated market levels as feedlot managers struggle to sell fed cattle and packers struggle to sell the finished product despite a considerably reduced harvest schedule,” explained analysts with the Agricultural Marketing Service (AMS) Friday. “Even lightweight stocker cattle and calves that previously appeared resistant to bearish signals fell victim to the down market.”
Swimming in red ink, with no immediate relief in site and having to accept lower fed cattle bids from the packer, cattle feeders took a bite out of calf and feeder prices. Feeder cattle and calves sold $5-$8/cwt. lower than the previous week with plenty of instances of $10 lower on all classes; as much as $15/cwt. lower on lightweight stockers.
Bearish demand from wholesalers – Choice boxed beef cutout value continues stuck in the $180s – was magnified by the continued slow trade in the Northeast following the recent winter storms there.
Even with slowed production, packers waited to buy cattle until they could squeeze another couple of dollars from the market. Fed cattle sold mostly $2 lower on a live basis at $123/cwt. Dressed sales were mostly $4 lower at $196.
Comments from USDA Secretary Tom Vilsack last week added to the negative market psychology. He told folks USDA may need to furlough federal meat inspectors to achieve necessary cost reductions that will be imposed through sequestration unless lawmakers agree to spending cuts before March 1 (see "USDA Says Meat Inspectors Might Be Furloughed").
“Demand may trump supply, but it still seems inevitable that the smallest cattle inventory in 60 years will outweigh our economy concerns and high feed costs with (compared to 60 years ago) a U.S. population that is twice the size and a world population that is over 2 1/2 times larger, along with a much improved infrastructure,” AMS analysts say. But, they add, “Something has got to give for fat cattle prices to break through the all-time record resistance point of 130/cwt. and for feeder markets to surpass record highs established about this time last year.”
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AMS analysts say potential weights that could tip the scale include a rally in beef exports (which could bump boxed beef values higher), relief from winter storms in the densely populated Northeast or significant moisture in major grazing areas, and in the Corn Belt for a bin-busting corn crop that could provide some relief in feed prices.
“Any of these, or the slight combination of them at any level could be enough to jumpstart feeder cattle prices back to record levels,” AMS analysts say. “Perhaps an increase in heifer retention would be enough to tip supply-side scales in the market’s favor.”