The early Spring rally appears to be giving cattle feeders a second act, said Texas A&M agricultural economist David Anderson in a letter to Extension Agents.
After touching $130 per cwt on a live basis in February, the fed cattle market dropped dramatically into the $110s, Anderson said. However, the market rebounded to $124 to $126 by last week, leaving fed cattle up a good $8 per cwt during April.
Higher cutout values are feeding the higher fed cattle prices, he said. The USDA’s choice beef cutout started this week at $224.50, up $13 in the last seven weekdays.
The choice cutout is about near this point a year ago, while fed cattle prices are about $12 below this point last year.
That has resulted in a live-to-cutout price spread more than $100 per head greater than April 2017, Anderson said. The choice/select spread is widening seasonally as the choice cutout increases faster than the select.
WEATHER PLAYS A PART
It’s worth remembering that winter has lingered on in much of the country throughout April, likely delaying beef orders and featuring heading into grilling season, Anderson said. But there is evidence now of a rapid spike in beef orders for retail featuring over the next several months. Rib and loin primal cut values are pulling the cutout higher with both up more than $20 in the last week.
Through April, steer slaughter remained less than 0.5% higher than year ago as increasing fed beef supplies have come largely from heifers, he said. Heifer slaughter has been more than 12% greater than a year ago.
Weights are higher than a year ago for steers and heifers, with federally inspected steer dressed weights up almost 20 pounds and heifer weights up 10 pounds. Both are declining seasonally now with some weeks before their normal annual low.
RALLYING DESPITE GROWING SUPPLIES
The markets might be in the midst of a second spring rally, the market is doing this in the face of growing supplies, Anderson said. Larger numbers of cattle on feed indicate even more cattle and beef are coming to market in coming months.
The slaughter increases from heifers and cows is likely just a function of timing and more steers are coming, he said.
The same cold weather that may have delayed some beef demand also delayed some planting, he said. Farmers indicated to the USDA that they intended to plant fewer corn acres this year, and fewer acres combined with early weather have led to some higher corn prices now and in fall futures.
CATTLE, BEEF RECAP
There were no sales on the Livestock Exchange Video Auction Wednesday. The previous Wednesday, 161 head sold for 1- through 9-day delivery at $122 per cwt, and 338 sold for 1- through 17-day delivery at $120.
Early week cash cattle trade last week was reported at $120 to $121 per cwt on a live basis, down $1 from the previous week and lightly at $195 dressed, steady with the upper end of the previous week’s range. However, Friday trade was at $124 to $126 live, up $3 to $4, and at $198 dressed, up $3 to $7.
The USDA choice cutout Monday was up $2.68 per cwt at $224.42, while select was up $0.47 at $204.79. The choice/select spread widened to $19.63 from $17.42 with 91 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday, was $139.31 per cwt, down $0.68. This compares with Monday’s May close of $140.17, down $1.85.