Market optimism grew this week as futures prices gained strength and snug front-end fed cattle supplies suggested higher prices. The notion was justified when trade finally developed late Friday with moderate trade and good demand.
Live prices were $3-$4 higher than the previous week at $129-$130 per cwt. Dressed trade was $5 higher at $205.
“Breaking through the $130 barrier is a big psychological gain as that price level is the highest since the middle of June 2017,” say analysts with the Agricultural Marketing Service (AMS).
Live Cattle futures closed an average of $2.60 higher week to week on Friday ($1.55 to $4.02 higher).
Languishing wholesale beef values found some life and helped, too. Choice boxed beef cutout value was $3.36 higher week to week on Friday at $209.88 per cwt. Select was $2.38 higher at $205.12.
“The finished cattle market is outperforming many people’s expectations right now, resulting in the feeder cattle market outperforming expectations,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments.
Calves and feeders trade steady to higher
Steers and heifers sold steady to $5 per cwt higher, according to AMS.
“Buyers continue to pay up for cattle suitable for summer grazing, as they anticipate the supply of those calves will get more difficult to find the further into the year they get,” AMS analysts say.
Feeder Cattle futures closed an average of $3.71 higher week to week on Friday ($2.85 to $4.65 higher).
Growing drought implications are a wildcard, of course.
“Record-setting drought continues to push lighter weight yearlings into the market early this year,” noted the AMS reporter on hand for Thursday’s auction at Tulia Livestock Auction in Texas. Feeder steers and heifers there sold $1-$4 higher.
“Buyers are betting on the come as the drought picture in many states continues to intensify,” AMS analysts say. “Even though rainfall totaled 2-6 inches from East Texas to Tennessee, the West Texas area is listed in extreme drought. Amarillo passed the four-month mark without receiving any measurable amount of precipitation.”
Increased late-year feedlot placements due to drought and relatively slower growth in last year’s calf crop lowered USDA’s expectations for beef production this year by 35 million pounds to 27.7 billion pounds. That’s still 6% more than last year’s estimated production of 26.2 billion pounds, which was 3.8% more than in 2016.
“This reflects anticipation of fewer cattle to be placed in feedlots in the first half of the year and marketed in the second half, although it is largely offset by the first-half marketing of cattle placed in late 2017,” say analysts with USDA’s Economic Research Service (ERS) in the latest Livestock, Dairy and Poultry Outlook.
ERS analysts note that the timing and weight of placements in the coming months will increasingly depend on precipitation in the Southern Plains.
Demand strength continues
“Beef demand since 2014 has been extremely strong relative to the years of the recession. Though beef production is expected to continue increasing in 2018, there is no reason to make the assumption that beef demand will decline,” Griffith says.
“The domestic consumer has continued to demand ground beef products as well as high-quality middle meats. Similarly, the export market has continued to demand U.S. beef products, which has helped absorb some of the increased production.”
U.S. beef exports last year were up 6% in volume to 1.26 million metric tons, according to data released by USDA and compiled by the U.S. Meat Export Federation. That’s the fourth-largest volume on record and the second-largest of the post-BSE era. Beef export value last year was 15% higher than the previous year at $7.27 billion, which is a new record.
Beef export value last year averaged $286.38 per head of fed slaughter, up 9% from 2016 and the second highest on record.