Cattle carcass weights have a strong seasonal tendency to decline from March to late April, and futures traders Wednesday said this was behind the gains in futures prices.
Touting the seasonal decline in carcass weights implies a belief in a coming tighter beef supply and rising prices for beef and fed cattle. But the waters aren’t all that clear. Dressed weights currently are above last year and the previous five-year average, which could effectively negate the effects of seasonal declines.
Average steer slaughter rates usually dip in February, but they rise again in March, April and May. And beef production only dips a little from its January high and tends to flatten through April before rising into late June.
To plot federally inspected steer dressed weights, the Livestock Marketing Information Center works USDA Agricultural Marketing Service and National Agricultural Statistics numbers together.
In the last week of January, federally inspected steer carcass weights averaged 898 pounds, down one from the previous week and down four from 902 the first week of January. This continues a steady decline from the second week of November when it was 925 pounds.
So then, steer carcass weights have declined 27 pounds, or 2.92%, since November and have lost 32 pounds, or 3.44%, since the record high of 930 pounds set the second week of October.
Yet carcass weights remain stubbornly above year ago and seasonal levels, producing more beef than in those other years and a conundrum for cattle futures bulls: Will a seasonal decline in dressed weights be enough to overcome year-over-year gains in beef production, and if so, will it be enough to propel product prices high enough to influence cattle to any appreciable degree?
BEEF CUTOUT PRICES
While wholesale beef cutout prices tend to rise in March, the rise does not carry through April as does the seasonal decline in carcass weights.
In addition, boxed beef cutout values remain below last year and above the 2010-2014 average. The trend so far appears to be following last year more than the previous five-year average, so it is possible that prices this year will rise inversely with the decline in carcass weights.
However, this year’s boxed beef cutout values are an extension of an overall decline begun the third week in March last year. Therefore, it may be hard for beef prices to mimic last year’s February-March rise.
CASH CATTLE QUIET
Cash cattle markets this week remain quiet, although the USDA reports 88 heifers sold on a live basis at $128 per cwt, which would be at the low end of Nebraska’s cash market last week.
Bids of $131 per cwt on a live basis continue to be heard in the Plains, and asking prices are holding around $136. No dressed-basis bidding was reported, although asking prices range from $212 to $214.
Cash cattle sold $3 lower last week at mostly $133 per cwt on a live basis in Texas and Kansas. In Nebraska, live sales were posted at $128 to $132, with dressed-basis sales at $206, generally $4 lower.
The USDA reported lower wholesale beef prices Wednesday, with choice down $0.14 per cwt at $214.35, and select off $1.44 at $207.63. The choice/select spread widened to $6.72 from $5.42, and there were 139 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Tuesday was $156.95 per cwt, unchanged. This compares with Mar’s Wednesday settlement of $156.00, up $1.50.