The cattle markets started the summer moving into record-high price territory, reported Stephen Koontz, agricultural economist at Colorado State University, in a Livestock Marketing Information Center letter called In The Cattle Markets.
The five-market weighted average cash fed cattle price pushed past $225 per cwt while prices in the Southern Plains were around $220, Koontz said. Live cattle futures contract prices were at a discount to cash and struggled to break $215 until last week when Aug topped out at $220.05.
FEEDER CATTLE ALSO STRONG
By region, depending on differences in supply, cash feeder cattle prices for 7-8 weight cattle were higher than $300 per cwt, 6-7 weight cattle were more than $350, and 5-6 weight animals were pressing $400, he said. Record highs, yet feeder cattle futures prices only briefly pressed above $300 per cwt until last week when Aug hit $314.20.
Koontz said he doubted cattle prices have peaked cyclically. Beef supplies will remain tight for the foreseeable future since the current feeder cattle supply tightness is the result of long-term drought, years of herd liquidation. Supplies will only tighten further when herd building occurs.
SHORT-TERM FACTORS
Typically beef production increases through the summer supported by heavier slaughter weights, he said. And, while the seasonal trend is likely to continue this year, placements across different weight groups suggests very tight supplies.
Koontz said he also watches the number of cattle on feed more than 120 and 150 days. Both were large and reinforced ideas the inventory of cattle on feed is front-end weighted.
So, the supply side is clear, he said. The story of cattle prices will be written by demand and communicated through the boxed beef composite cutout value.
BOXED BEEF VERY STRONG
While not record high, the composite value is very strong, he said. While composite beef values are excellent, fed cattle prices are aggressive relative to packer margins, which are not good.
And this is the time of year when packer margins typically at their best, Koontz said. Therefore, up-moves for cattle will be reasonably limited and focus for cattle outlook should be any beef market weakness.
Where the protein markets currently sit, beef prices are very strong whereas pork and poultry are much weaker and the prospects are for continuing weakness with likely expanded production, he said. And, for the last five years, the price of substitute meats did not matter much. Perhaps this will be important later in the current year.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $235.68 per cwt to $239.53, compared with last week’s range of $225.15 to $243.37 per cwt. FOB dressed steers, and heifers went for $367.99 per cwt to $371.91, compared with $353.24 to $376.32.
The USDA choice cutout Wednesday was up $2.36 per cwt at $388.87 while select was up $0.20 at $372.74. The choice/select spread widened to $16.13 from $13.97 with 65 loads of fabricated product and 25 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $400.20 per cwt, and 50% beef was $181.50.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.22 to $1.30 a bushel over the Jul corn contract, which settled at $4.33 1/2, up $0.02.
No live cattle delivery notices were posted.
The CME Feeder Cattle Index for the seven days ended Tuesday was $311.04 per cwt, down $0.42. This compares with Wednesday’s Aug contract settlement of $304.17, up $0.82.