Slaughter steer prices are coming under pressure from two fronts, and a change does not appear imminent.
Those pressure points are coming from within the industry and from the economy, which is growing so slowly the Federal Open Market Committee may not raise the Federal Funds interest rate following its June meeting, a move thought nearly inconceivable a few months ago.
GREATER SUPPLY
The first, and most obvious to cattle producers, is the increasing size of the herd. The January cattle inventory report listed the total herd size at 92.0 million head, up 2.9 million, or 3.25%, from 89.1 million the year before. Since bottoming in 2014 at 88.5 million head, the US herd has grown by 3.6 million head, or 4.07%.
The extra supply can be correlated directly to the decline in fed steer prices, although there is a lag of a year or two more as cows are bred, the calves grown and fed and eventually sold for slaughter.
Many market analysts feel the herd will continue to show growth in the mid-year USDA Cattle Inventory Report due July 22. Cow/calf producers still are making money, and pasture conditions in many parts of the country remain good.
However, there is evidence the rate of herd growth may be slowing. Data from the USDA’s Agricultural Marketing Service and the National Agricultural Statistics Service show a rise in beef cow slaughter from mid-March that more closely parallels the 2010-2014 average rather than last year’s unseasonal decline.
Cow/calf producers are likely to resume a more normal flow of older cows to market once their herds are rebuilt to comfortable levels via an influx of heifers. Those cows that were kept for one or two more calves while replacement heifers were being groomed can now be sold.
ECONOMIC PRESSURE
The US added only 38,000 jobs in May, about 126,000 fewer than the average economist guess and the fewest for any month since September of 2010. What’s worse, the number of new jobs in March and April were revised downward by 59,000.
Ron Plain and Scott Brown, agricultural extension economists at the University of Missouri wrote in their weekly market assessment that “since domestic meat demand usually tracks with the economy, this is worrisome news for summer meat demand.”
This may be the reason wholesale beef demand seems so flighty. Per-capita meat consumption is going up as supplies of beef, pork and chicken rise, and consumers apparently would like to buy more beef.
A shift toward more buying interest for choice product would indicate a desire for good-eating beef, but they just can’t buy a lot more, especially with all the cheaper alternatives available.
CASH CATTLE MARKET MOSTLY QUIET
Cash cattle markets Wednesday generally were quiet, although a few trades at $197 per cwt on a dressed basis were reported in Iowa. This would be down $9 to $10 from last week, but there was no word on the quality of these cattle.
Otherwise, cattle markets saw bids at $122 to $123 per cwt on a live basis against asking prices of $128 to $130. Dressed-basis bids ranged from $192 to $198.
The USDA’s choice cutout Wednesday was $1.92 per cwt lower at $226.42 per cwt, while select was up $0.19 at $204.26. The choice/select spread narrowed to $22.16 from $24.27 with 108 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Tuesday was $147.44 per cwt, down $0.36. This compares with the Aug settlement Wednesday of $140.25, down $1.90.