Cattle on Feed in Focus as Beef Cutout Prices Remain Bullish

Bullish beef cutout sentiment continued Wednesday as packers sought product to meet demand but futures prices, although up a second straight day, were curbed by the Cattle on Feed report expectations on Friday.

A rebound in packer margins to positive territory and a decline of about 13,000 cattle for sale this week, contributed to higher cutout values. Wednesday’s estimated average beef packer margin was a positive $29.00 per head, up from a negative $1.40 on Tuesday and a negative $40.05 a week ago, as calculated by, according to Reuters.

Year to date, the Choice/Select spread has averaged $5.53, compared to $5.92 for the same time period in 2015, the USDA said. However, in the last few weeks, the Choice/Select spread has increased year over year from 2015 levels. Looking back, from 2010 through 2015, the Choice/Select spread averaged $8.25/cwt, with a weekly high peak of $22.16 and a low of -$1.36.

During the 2010-2015 time period, the Choice/Select spread exceeded the average 43% of the weeks. Since 2010, the highest annual average Choice/Select spread occurred in 2012 at $10.00 and the lowest was 2010 at $5.95. The average range for the Choice/Select spread from 2010 through 2015 was $18.49.

In cutout values, choice was up $2.91 at $233.92 and select was $2.10 higher at $223.68, a $10.24 spread.

COF Placements Seen Higher

Cash cattle trade continued to be inactive Wednesday on light demand in all major feeding regions, with not enough sales for a market trend, according to the USDA. Prices were around the $138.00 to $139 area. Analysts expect prices to rise as packer demand filters down. But there may not be a clear picture until after Friday’s Cattle on Feed report, which is expected to be bearish. A Reuters poll showed that analysts, on average, expect Friday’s report to show 8% more cattle were placed in feedlots last month than in February 2015.

Analysts say packers are shifting their focus on beef after pursuing pork for the early Easter seasonal. One analyst said they are trying to catch up after being caught short of beef and cattle. Early warm weather west of the Mississippi has spurred grilling, contributing to more demand for wholesale beef.

Caution on Anaplasmosis

Cattle producers should be vigilant about the blood disease anaplasmosis after an more acute  outbreak last year. According to a DTN/Progressive Farmer article, cases of the blood disease increased last year in areas where it had not been seen in years. Producers learned it can kill cattle.

The article said cattle operations in some parts of Kansas dealt with some of the highest levels in the history of the state during 2015 . While the disease had been endemic in Kansas for 100 years, the Kansas State University college of veterinary medicine said last year’s outbreak took it to every county in the eastern part of the state. Asked if the increase was due to ticks, a common spreader of anaplasmosis, or to the introduction of new cattle as operators try to grow herds, a KSU veterinarian  said it’s impossible to know.

A veterinarian at Texas A&M, Tom Hairgrove, stressed that while anaplasmosis may seem nonexistent at times, the dollars U.S. producers spend to manage and treat the condition are anything but invisible. Annually, researchers estimate the cost of anaplasmosis at about $300 million. A previously uninfected herd, once infected, will lose an estimated 3.6% of its calf crop to the disease. Cull rates in a newly infected herd can increase by 30%. Death loss in adults will average 30%

In all, 40 states reported the disease in 2015. It is most common in the Southeast, the Lower Plains, the West and the Gulf Coast. believes some of the recent rebounds in infection numbers have been due to lingering effects from drought, which caused cattle to be moved around more as a result spreading anaplasmosis.

The Texas A&M veterinarian said producers destocked during the long droughts and repopulated when the droughts broke. “Anytime you commingle infected and uninfected cattle, you run a risk of anaplasmosis, ” Hairgrove said.

Anaplasmosis spreads via infected blood and insects like biting flies and ticks are prime carriers. It takes three to five weeks of incubation before symptoms appear. Cattle infected when they are less than 2-years-old usually adapt, becoming carriers.

Older cattle infected for the first time are hardest hit. They often have serious symptoms that can include fever, erratic or aggressive behavior, yellowing of the whites of the eyes, pale gums, labored breathing and anemia. Many cattle survive the disease, but it can be fatal.