Boxed beef prices thrust higher again Tuesday with choice reaching the highest average since January 18, pushing live cattle futures to solid gains and raising hopes for higher cash prices in coming days.
Choice prices were up $3.54 to $231.01 and select boxes were $4.09 higher to $221.58. WTD slaughter was estimated at 223,000 head, up 11,000 head from last week, and 5,000 head larger than the same period in 2015. The choice/select spread was $9.43 with 105 loads sold in the spot markets. The CME Feeder Cattle Index for Monday was 19 cents higher to $160.82. This compares to Mar’s Tuesday close of $163.97, up $1.925 per lb .
The cutout jump caused the April Live cattle futures market to break through the $1.40 level in with expectation of higher cash prices. The June Live Cattle contract posted its highest close since November 3., up $1.50 at $130.325. At one point the contract touched a four-month high. The contract is up 9.5% since February 11.
The USDA said cash trading of beef cattle has been at a standstill in all major feeding regions in recent days. Live sales were at $138 last week in the Southern and Northern Plains and continued slow into Tuesday afternoon. Prices at been at $138 to $139.00 the prior week. Dressed sales in Nebraska sold at $220, the same as last week.
Spring Early, Grills Burn
Analysts and other industry observers said the early outbreak of warmer weather is having an effect on boxed beef prices. It is likely to boost early spring grilling, especially in the south and southeastern regions of the country, a trader said told Reuters. He said with the prices jumping as they are, “I would expect to packager to have to pay up again for cattle. ”
In addition to the higher beef prices, there were fewer cattle for sale this week and much-improved packer margins . All point to higher cash returns for cattle sellers. Tuesday’s estimated average beef packer margin was a negative $1.40 per head, up from a negative $4.30 on Monday and a negative $33.20 a week ago, as calculated by HedgersEdge.com.
One packer said they are having to buy more cattle as product is rolling out the door. A major packer said there are good, orderly movements and that they are getting good margins. Packers are short-bought, however, said one analyst, and “they are going to be tough to deal with.” He said they don’t have any extra money, and market fluctuations offset week to week activity. Cash cattle should be a steady, higher market during the next few weeks, he said. “I doubt there will be any less money paid for cattle.”
But he said Friday’s Cattle on Feed report from the USDA will be watched closely. That is an opportunity to gum up the works, he said, emphasizing it is expected to be a bearish report with a lot of placements.
Ranchers and farmers are too often bogged down in the daily operations and don’t have much time to think about the future, even though they know they should. There is help for them from FABPRI, the Food and Agricultural Policy Research Institute at the University of Missouri. The group last week submitted its annual report to Congress.
The baseline finds that the next 10 years could be difficult for farmers. “We are looking at several years of pretty tight financial situations for U.S. agriculture,” said FAPRI director Pat Westhoff. “Farm income is less than half of the 2013 peak and we expect it to remain low for the next several years.”
The huge drop in the prices for many major commodities has driven income down and will keep it down, said Westhoff.