It seems the market is turning its back on cattle producers again, issuing a “gotcha” instead of an “attaboy.”
Cattle feeders often complain that packers pull the rug out from under them by withdrawing or reducing premiums for certain carcass characteristics just about the time they begin supplying the latest demand signal.
If the market wants big carcasses, producers will alter their genetics, feeding practices or whatever to meet the demand. If the market wants and pays for certain feeding practices and the documentation that such cattle-rearing demands have been met, they will do that.
But what really gets producers’ goat is that time and time again, the premiums associated with producing the type of cattle demanded evaporate just when they get geared up to meet them. The time and money invested then are worthless, making producers warry of the next “latest and greatest” market signal.
Packers often get the blame for such market moves, a charge that may or may not be fair, but such an occurrence may be happening again.
CHOICE/SELECT SPREAD UNSEASONALLY WEAK
The latest market demand has been to produce more choice and prime beef. Cattle feeders were paid handsome premiums for choice carcasses, and feeders responded.
For the week ended Sep. 3, the USDA reported that choice-graded cattle made up 70.38% of the Sep. 3 week’s slaughter, compared with 70.65% last week and last year’s 69.08%.
USDA Agricultural Marketing Service data shows a significant increase in the percent of graded beef that made choice. The trend was firmly in place by January of last year and has continued to widen the gap between the latest price and the 2010-2014 average.
And the difference, or spread, between choice and select beef prices shows a drop during the first half of September when normally there is an increase. This comes after an unusually strong spring and early summer.
There are two ways to increase choice beef production – both of which cost money for cattle producers – improved genetics or feeding cattle longer.
The best way is also the slowest, and that is to select cows and bulls for their genetic potential to produce calves that will go on to yield choice or prime carcasses. The alternative is the fastest, feed the cattle already on hand longer so they can attain their full potential to marble without getting so fat they incur packer penalties.
During last year’s run-up in demand for choice beef, packers were setting aside many of those penalties. But some have begun to institute penalties for being overly large, which catches some of the fattest cattle.
CASH CATTLE MARKETS QUIET
Cash cattle markets Wednesday were quiet after trading last week $5 per cwt lower on a live basis at $105 and $9 lower on a dressed basis at $166. Bids were about $104 live with asking prices around $110.
The USDA’s choice cutout Wednesday was $0.82 per cwt lower at $185.80, while select was off $0.98 at $180.32. The choice/select spread widened to $5.48 from $5.32 with 147 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Tuesday was $134.36 per cwt, down $0.06. This compares with the Sep settlement Wednesday of $132.67, down $0.70.