Cash Feeders Continue Working Higher Despite Topping Fats

5-7-14 – Cash feeder cattle prices continue to work higher, in spite of softer slaughter steer prices over the last month, squeezing the margins of cattle feeders.\r\n\r\n Weekly values for medium and large, 700- to 800-pound, No. 1 feeder steer prices in the southern Plains hit a record high last week at $180.52 per cwt, resuming a general upward direction after a two-week consolidation, according to USDA data compiled by the Livestock Marketing Information Center.\r\n\r\n Medium and large No. 1 steers weighing 400 to 500 pounds last week also set a record high of $240.45 after a minor one-week consolidation.\r\n\r\n Both trends are larger than life, and both are running counter to last year’s trend.\r\n\r\n Prices for the heavier-weight steers worked lower last year until the last week of May when they bottomed at $132.29. From there, they worked higher until Fall.\r\n\r\n The lighter-weight calves followed a similar pattern, declining until the last week of May at $163.88 before climbing into Fall.\r\n\r\n The five-year trend for both is to be relatively flat with the lighter-weight steers less in demand until wheat pasture is available in Fall.\r\n\r\n The CME Feeder Cattle Index for the seven days ended Monday was $181.10, up $0.27, while the May futures contract settled Tuesday at $183.47, up $0.82. June live cattle settled at $137.92, up $0.67.\r\n\r\n Slaughter steer prices are beginning to show a tendency to follow the seasonal price pattern, albeit at much higher levels than is normal and with much greater volatility. A first-quarter gain is being followed by a general flattening that will see seasonal easing during the dog days of summer and overall support later into the holiday season.\r\n\r\n \r\n\r\nBOXED BEEF STRONG BUT LEVELING\r\n\r\n \r\n\r\n Boxed beef prices are leveling but remain strong, supported as much by end cuts as by the middle meats. The USDA reported primal rib prices last week at $343.70 per cwt, up 3.23% from the $332.93 of the prior week and up 21.75% from the same week a year earlier.\r\n\r\n Primal chucks were $183.04 last week, up 0.41% from $182.30 a week earlier and up 12.61% from a year earlier. Primal rounds were $192.40, down 0.64% but up 19.11% from $161.53 a year earlier.\r\n\r\n This week, boxed-beef values are softer as buyers take wait-and-see attitudes ahead of the Mother’s Day observance this weekend. Mother’s day often is a take-Mom-out-to-dinner time, which tends to support demand for smaller steaks and chicken. But there is a growing popularity in grilling Mom’s special meal, which also tends to favor beef and chicken.\r\n\r\n The USDA’s choice composite cutout value Tuesday was reported at $227.88 per cwt, down $1.02, while the select cutout was $213.56, down $1.89. The choice/select spread widened to $14.32, and there were 128 fabricated loads sold into the spot market after a slow day Monday.\r\n\r\n \r\n\r\nCASH CATTLE MARKETS STEADY TO WEAKER\r\n\r\n \r\n\r\n There were reports Tuesday of scattered cash cattle sales in Nebraska at $137 to $138 per cwt on a dressed basis to a regional packer and a little in Kansas at $145 on a live basis. These would be about $1 to $2 below the bulk of last week’s trade. They also don’t fit with reported declines in feedlot showlists by a major advisory service.\r\n\r\n However, it does fit with estimates of larger showlists by other analytical firms. It also fits with last year’s tendency for fed cattle prices to fade into summer and with projections of increased slaughter availability after a more aggressive first-quarter placement rate.\r\n\r\n \r\n\r\nIN OUR OPINION\r\n\r\n \r\n\r\n–Mexico’s plan to reopen its borders to all US beef likely won’t mean a huge increase in exports. Mexico already allows beef from cattle 30 months or younger, which comprises the bulk of US slaughterings.\r\n\r\n–But China’s lifting of a ban on Virginia poultry could affect chicken demand. Poultry is the largest individual sector of Virginia’s agriculture.\r\n\r\n–JBS employees at the company’s Worthington, MN., pork plant have authorized a strike over wage and insurance benefits. Whatever comes of it likely will be a pattern in contract talks at other JBS facilities.