Second-quarter beef production is expected to rise beyond seasonal norms this year, potentially weighing on beef and cattle prices and providing the weight that takes both lower.
The gain in quarterly beef production normally runs around 266.5 million pounds, and last year’s increase was about 316.1 million. But some analysts expect larger fed cattle and increased slaughter rates to produce 457 to 601 million more pounds of beef in the 2015 quarter.
Those analysts expect the increased production to weigh heavily on the markets once the Father’s Day and Memorial Day demand slackens. Some might expand this grace period to include the Independence Day holiday.
Consumers tend to override their instinctive tendency to avoid high prices around holidays, but once the overriding factor is no longer there, they revert back to avoidance to some extent.
And surveys have shown that consumers are wary of the economic recovery and are paying down debt and adding to savings rather than spending, which only adds to theories of post-holiday consumer cutbacks.
Market analysts have been expecting those high prices to take the wind out of the sails of beef markets for months, but with supplies possibly set to rise, beef marketers could be staring at larger inventories, lower prices or both.
Wholesale beef prices currently are at or near record highs, further exaggerating the potential for a decline.
FEEDLOTS FRONT END LOADED?
For months, market analysts have said feedlot placements that were weighted heavily toward heavier calves, combined with barely adequate sales of fat cattle to packers have rendered feedlots over-supplied with market-ready or near-market-ready cattle. Many have speculated that these cattle are due for slaughter in the near future.
While cash cattle prices last week were about steady with the previous week, there were enough cracks in western Nebraska and elsewhere to make some think the tide is turning. Besides, volumes sold last week were only moderate.
There is disagreement among analysts about overall feedlot showlist sizes this week with some thinking they are down from last week and others saying they are up. Whatever the change in the number of cattle available for purchase this week, packer buyers are only in it this week for enough to fill a holiday-shortened work week next week.
Packer bids were reported in Kansas Tuesday at $157 per cwt on a live basis, which lightened the mood of bullish cattle traders, since it’s not often that packers bid for cattle on a Tuesday. Cattle owners were holding for $163, against last week’s mostly $161 price.
There were reports of other packer buyers bidding $1 over this week’s market, which may be a precursor to a lightly traded negotiated market this week.
CASH CATTLE MARKETS FLAT
Cash cattle markets were quiet Tuesday as sellers rejected early packer bids. Last week, cattle traded at $161 per cwt on a live basis and at $256 to $257 on a dressed basis.
Asking prices are $163 live and about $260 dressed.
Beef prices Tuesday were mixed, with the USDA choice cutout at $265.59 per cwt, up $2.67, and the select cutout at $251.03, up $0.61.
The CME Feeder Cattle Index for the seven days ended Monday was $219.83 per cwt, up $0.28, compared with the May futures settlement Tuesday of $219.35.