Wholesale prices for beef may have begun a seasonal turn higher last week, but Monday’s USDA cutout prices could make traders think this year’s turn toward spring highs could resemble the average rather than last year.
Last year, USDA weekly cutout values for choice boxed beef rose sharply in March and the first half of April. The April slide was counter-seasonal, and the choice cutout value didn’t peak until August – a 30.6% rise from the January low to the August peak.
On average, the choice cutout sets the annual low in February and then rises 9.92% to a late-May/early June annual peak. The peak generally is challenged in November.
This year, the choice beef cutout made its usual January push followed by an exaggerated slide to the February low. If the market mirrors last year, the cutout should rise 16.6% to $278.31 per cwt by late March.
However, if the market follows the seasonal trend, the rise from the February lows to a late-March peak is liable to be more like 6.53%, or $254.27 per cwt.
PACKER MARGINS, CATTLE PRICES LOOSLY TIED
While a turn toward higher beef prices will be welcomed by beef packers, since they are thought to be losing money on every head slaughtered and processed, higher prices may not translate into higher slaughter cattle prices – at least not simultaneously.
Average slaughter cattle prices in the Southern Plains bottom in late January and move higher into the first week of April before beginning a slow slide into mid-summer. From there, they move up as the holiday season approaches, peaking the last week of December. Excluding last year, the previous five-year average high is $114.17 per cwt.
Last year’s annual low was struck the first week of January with the average trend upward from there. The annual high did not appear until the last week of November at $112.94 per cwt.
The Sterling Beef Profit Tracker estimated beef packer margins last week at a minus $94.69 a head, up from the previous week’s $98.60-per-head losses. A year ago, beef packers were losing an estimated $81.72 a head.
That means, packer buyers will continue to be tough negotiators, and packers may continue their light slaughter schedules, making it difficult for feedlots to pull out of their own losses. The Sterling Profit Tracker had them losing $105.09 on every unhedged animal sold last week, down from $77.03 the week before. A year earlier, they were making an estimated $253.80 a head.
CASH CATTLE MARKETS UNTRADED
Cash cattle markets Monday were quiet with no bids or offers reported. However, market analysts said feedlot asking prices were expected to begin the week’s negotiations around $162 per cwt on a live basis and $260 in Nebraska’s dressed market.
Cattle traded last week in a range from $157 to $159 live, down $1 from the previous week, and at $250 to $254 on a dressed basis, down $4 for the week. Cattle sources say feedlots hope to make this up this week and chew away at their negative margins.
Spot market boxed beef prices Monday were mixed, with the USDA’s choice cutout up $1.09 per cwt at $248.67 and select down $0.12 at $245.45. The choice/select spread widened to $3.22 from $2.01 on Friday.
Volume, however, was very light with only 44 loads of fabricated product being sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was down $1.48 per cwt to $206.24 from $207.72, closing the gap on the Mar futures contract, which settled Monday up $2.20 per cwt at $204.10.