Steer and heifer calves traded mostly steady to $5 per cwt higher this week, according to the Agricultural Marketing Service (AMS), though there were instances of $1-$2 lower in the north-central part of the nation.
“Demand continues to be very good for grazing calves, as cattle raisers are eager to turn their cattle out on grass,” AMS analysts say. “Due to limited numbers, premiums were paid for good quality, long-time weaned calves with all their shots. Discounts were placed on fleshy, un-weaned, soft bawling calves.”
Although demand remains for feeder-weight cattle, buyers were more reluctant this week with steers and heifers trading unevenly steady, $3 lower to $5 higher.
“The cash slaughter cattle market continues to trade at a double-digit premium to the April live cattle contract,” AMS analysts say. “The June contract and later months are mostly at a double-digit discount to April, making feeder buyers cautious.”
Likewise, Andrew P. Griffith, agricultural economist at the University of Tennessee, explains in his weekly market comments that the heavy discount in deferred live cattle contracts will keep nearby feeder cattle futures in check, preventing a major price run.
“The expectation is for lightweight calf prices to strengthen through March before being pressured lower through the summer and fall months,” Griffith says. Such a price movement would be in line with the seasonal tendency for stocker cattle.”
While Griffith says a more seasonal pattern is expected for all classes of cattle for the remainder of this year, he adds that the aforementioned discount in deferred live cattle futures could limit the increase in feeder cattle prices.
Fed cattle trade steady to higher
Negotiated cash fed cattle sales were mainly steady to $1 higher than last week at $125-$128 per cwt, with the higher end of the range paid in the Northern Plains and Iowa-Minnesota. Dressed trade was steady to $2 higher at $200-$202.
“Cattle feeders welcome the extremely positive basis values, and the positive basis will continue to make them willing sellers if futures continue to trade at such a heavy discount,” Griffith explains. “The continued strength in finished cattle markets is not surprising, as beef demand remains strong. There is a good possibility fed cattle prices could continue to exceed the $120 mark for several weeks before being pressured by the summer run of cattle.”
Slaughter cattle continue to receive support from higher boxed beef prices, a decline in carcass weights and feedlots staying current, as well as strong domestic and export demand, according to AMS analysts.
“The beef retail department is finding that lower prices are driving a greater willingness by consumers to purchase premium beef products, and retail ads are full of beef promotions,” AMS analysts say.
Choice boxed beef cutout value was $11.76 higher week to week at $219.83 per cwt on Friday. Select was $6.94 higher at $210.99. The Choice-Select spread more than doubled to $8.84, helped along by greener cattle going to market.
“Boxed beef prices, similar to finished cattle prices, continue to remain strong during a time when beef demand is generally soft,” Griffith says. “The loin and rib primal cuts continue to be the primary players in the increase in cutout prices as domestic consumers appear to be in search of steak cuts earlier than normal.”
Keep in mind that recent wholesale beef values also are enjoying the benefit of tighter fed cattle supplies in the short term.
“Cattle supplies are at the tightest point today and over the next 30-45 days that they will be this year,” Kevin Good, senior CattleFax analyst, explained at last month’s 2017 Industry Outlook. In terms of the cattle cycle, he added that cattle supplies are probably the snuggest they’ll be for the next five or six years.
Besides beef, pork and poultry supplies are trending higher at record and near-record levels.
“Total U.S. meat production (estimate) for 2017 is increased from the previous month as higher forecast beef production more than offsets lower forecast pork and turkey production,” say analysts with USDA’s Economic Research Service (ERS), in the latest monthly World Agricultural Supply and Demand Estimates (WASDE).
“First-quarter beef production is raised on current slaughter data, and third-quarter production is raised as higher expected first-quarter placements are marketed in the second half of the year. However, carcass weights for the year are forecast lower as feedlot operators are expected to remain current in their marketings.”
Even with the anticipated increase in beef production, the WASDE projected higher prices than a month earlier based on demand strength.
The projected annual WASDE steer price increased $5 on both ends of the range, compare to the previous month, to $114-$121 per cwt. Projections for fed steer price by quarter: first at $121-$124; second at $116-$122; third at $110-$120; fourth at $110-$120.