Prices across the cattle market this week suggest that the spring top is in the books.
Calves traded from $3 per cwt lower to $3 higher, according to the Agricultural Marketing Service (AMS), amid continued strong demand for grass cattle.
Regional weekly average stocker and feeder prices were nearly steady, too, but trade felt lots iffier later in the week as wholesale beef values tumbled and cash fed cattle lost ground.
Choice boxed beef cutout value was $7.50 lower week to week at $214.12 per cwt on Friday. Select was $11.55 lower at $204.
The weighted average price at the Fed Cattle Exchange on Wednesday was $131.17 per cwt on 1,898 head sold. That was $2.18 less than the previous week’s weighted average on about 300 fewer head sold. Unlike the past few weeks, though, herky-jerky country trade moved in the opposite direction.
Negotiated cash fed cattle prices drooped across a wide range for current delivery: $2-$9 lower on a live basis at $124-$133 per cwt; $5-$9 lower on a dressed basis at $205-$208.
Live Cattle futures were an average of $1.72 lower week to week on Friday through the front three contracts and then an average of 53¢ lower, except for 12¢ higher at the very back.
Corn futures were an average of 8¢ higher week to week on Friday through the front six contracts. Most of the gain came on Friday, boosted by USDA’s Prospective Plantings report (see “Corn acres estimated lower…” below), which projects about 1 million fewer acres of corn than the trade was expecting.
Judging by cattle futures after midweek, along with month-end position squaring, traders continue putting more stock in cash prices meeting futures prices on the way down, rather than the other way around.
Certainly, prices should move cyclically and seasonally lower. In the shorter term, though, the argument can be made that front-month contracts are undervalued considering fundamental strengths like feedlot currentness, lighter carcass weights year to year and domestic demand that is stronger so far than many expected.
“Analysts have been reporting positive feedyard margins for over four months now with anecdotes of recent closeouts of some pens receiving over $400 per head profit,” AMS analysts explain. “With the increase in boxed beef cutouts recently, and with some of those cattle bought during the October-November lows, the potential for such substantial profit is very real.”
Seasonality returning to cull cow market
Cull cow prices began to lose steam in March and will continue to decline year over year, but they’re returning to more seasonal tendencies, according to the Livestock Marketing Information Center (LMIC).
“In the last two years, increasing U.S. cattle supplies pressured prices of all types of cattle lower year-over-year. For cull cows, an additional factor at play was huge imports of lean and manufacturing beef from drought-devastated Australia,” LMIC analysts say in a recent Livestock Monitor. “Imported beef from Australia and South America competes most directly in the cow-beef market rather than in the fed animal arena.”
Rather than the typical 18% increase (Southern Plains) in cull cow prices from November to March (2005-2014 average), increasing cattle supplies and imported beef dampened and at times overwhelmed the seasonal pattern the past two years.
“Looking ahead, cull cow price increases normally begin to run out of steam during March, but do not drop dramatically for several more months,” LMIC analysts say. “Year-over-year price declines are forecast to continue throughout 2017, but if lower imports persist as expected, that’s one less factor dragging on prices.”
Cutter cow prices increased $1.21 per cwt in February 2017, signaling an increase in demand for lean beef. ERS analysts forecast first quarter cutter cow prices at $60-$61 per cwt.