Beef packers may be rolling into a tough position that could last for a long while.
Market analysts are saying fed cattle supplies are apt to decline from last year, especially in the second quarter, likely forcing cattle prices higher. However, wholesale beef price gains to compensate may be stymied by consumer resistance.
FEEDLOT PLACEMENTS ARE KEY
For a variety of reasons, feedlot placements over the last four months of 2022 were less than a year earlier, the USDA said in its monthly Cattle on Feed report.
Placements in December were pegged by the USDA at 1.804 million head, down 156,000, or 7.96%, from 1.960 million in 2021, although 1,400, or 0.08%, more than the 1,802,600 for the 2016-2020 average.
November’s placements were listed at 1.925 million head, down 42,000, or 2.14%, from 1.967 million a year earlier and down 61,800, or 3.11%, from the previous five-year average of 1,986,800.
Feedlot placements in October came in at 2.100 million head, down 146,000, or 6.50%, from 2.246 million in the 2021 month and down 193,200, or 8.42%, from the 2016-2020 average of 2,293,200.
September placements totaled 2.085 million head, down 78,000, or 3.61%, from 2.163 million a year earlier and nearly equal to the previous five-year average of 2,085,200.
Some of those cattle that were placed on feed in September could have been marketed to packers in January. The rest will come due for slaughter in the coming months.
Plus, since annual calf crops were down from 2021 and 2020, a higher percentage than usual of the fall placements will be younger cattle, which will finish with lighter weights, resulting in less beef per animal, a market analyst said.
THE PROBLEM FOR PACKERS
Tuesday’s Bureau of Labor Statistics monthly Consumer Price Index had some troubling news for beef packers.
The CPI for All Urban Consumers rose 0.5% in January on a seasonally adjusted basis, after increasing 0.1% in December. Over the last 12 months, the all items index increased 6.4% before seasonal adjustment. Higher prices for everything means consumers will be pinched at the meat case, the analyst said.
But what’s interesting is that the food-away-from-home index rose at a slower rate than the food-at-home index, the analyst said. The restaurant food index was up 0.6% in January after rising 0.4% in December, while the at-home index rose 11.3% over the last 12 months.
The index for meats, poultry, fish and eggs increased 0.7% over the month, as the index for eggs rose 8.5%. The index for cereals and bakery products rose 1.0% over the month, while the index for nonalcoholic beverages increased 0.4% in January.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $159.00 to $161.05 per cwt, compared with last week’s range of $156.00 to $159.91. FOB dressed steers, and heifers went for $249.44 to $255.60 per cwt, versus $244.52 to $252.19.
The USDA choice cutout Thursday was up $3.88 per cwt at $279.55 while select was up $1.45 at $262.64. The choice/select spread widened to $16.91 from $14.48 with 84 loads of fabricated product and 23 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.50 to $1.70 a bushel over the Mar corn contract. Bids in Kansas were steady at $0.75 over Mar, which settled at $6.76 a bushel, down $0.00 1/4.
No live cattle contracts were tendered for delivery on Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $183.06 per cwt, down $0.01. This compares with Thursday’s Mar contract settlement of $186.22 per cwt, down $1.10.