It looks like the end of the summer doldrums in the beef market will not be enough to support a steady wholesale market into the end of the year.
Instead, USDA Agricultural Marketing Service data show a continued decline from this year’s extreme weekly average high of $250.86 per cwt on a carcass weight basis. What’s more, the market has been on this path since the peak was hit, basically following last year’s trend rather than the 2011-2015 average.
MANY THINGS COULD KEEP LID ON PRICES
Much of the observable data has the potential to keep prices in check, said Stephen Koontz, agricultural economist at Colorado State University, writing for the LMIC’s “In the Cattle Markets.”
The Cattle on Feed report was construed bullishly. Placements and on-feed numbers were surprisingly low relative to expectations, and futures prices rallied the following trading day.
But the underlying fundamentals all spring and most of the summer clearly suggest beef supply increases through the fall, Koontz said. This in part is seen through increases in the calculated volume on feed more than 120 days. The volume was lower than last year but up 9% when the seasonal tendency is to moderate.
Additionally, fed animal live weights were up 5%, and steer and heifer dressed weights were up 5%-6% from spring lows. The seasonal increase in meat per carcass is on track and the expected increase in animal numbers are as well, he said.
Weekly slaughter through last month was strong but the volume of animals available to packers is very large. Weekly cattle slaughter ran 3%-10% above last year through July and early August.
However, kill rates over September and October will be important for fed and feeder cattle prices well into next year, Koontz said. Packer margins are solid, and cattle feeding margins remain in the black, which bodes well for maintaining fed cattle marketings and feeder cattle prices at current levels.
LACK OF RETAIL FEATURES CONCERNING
A recent concern is the lack of news about beef featuring at retail.
Late summer featuring is present but is not as strong as that of early summer, Koontz said. Retail prices moved sharply upward through May and June after months of softening last fall.
This summer’s retail prices are similar to last year and the retail margin strengthened last month.
Strong consumer demand will be needed in the fall and it is not clear that it’s coming.
While domestic demand is not clear, trade in beef products continues to show solid strength, he said. Exports steadily increased through the spring and summer while other exports – notably pork – have weakened.
CATTLE, BEEF RECAP
Only one lot of fed cattle sold Wednesday on the livestock exchange video auction at $163 per cwt on a dressed basis.
Cattle traded last Wednesday on the video auction at $105.10 per cwt on a live basis for 1- to 9-day delivery and at $105 live and $166 dressed for 1- to 17-day delivery.
Cash trading was reported last week at $104 to mostly $105 per cwt on a live basis, down $2 from the previous week. Cattle traded in Nebraska’s dressed market at mostly $165 up to $166, down $7.
The USDA’s choice cutout Wednesday was up $0.48 per cwt at $192.93, while select was up $0.20 at $190.67. The choice/select spread widened to $2.26 from $1.98 with 108 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $145.85 per cwt, up $0.58. This compares with Wednesday’s Sep settlement of $143.30, up $1.25.