Live cattle futures continue to march higher, but the market could use some bullish fundamental news to keep the rally going.
Ninety percent lean trimmings remain strong, and 50% lean beef isn’t doing badly, but other cuts are showing signs of lagging.
BOXED BEEF FIRM WITH CRACKS
The weekly choice boxed beef cutout value from the USDA last week was $321.39 per cwt, up $3.10, or 0.97%, from $318.29 a week earlier and the highest this year. Last week’s value was down $14.57, or 4.34%, from $335.96 per cwt a year ago but up $73.76, or 20.8%, from the 2018-2022 average of $247.63.
Last week could be the 2024 high, though, a market analyst said. The five-year average has the annual cutout high occurring in the third week of May at $299.07 per cwt, but the 2023 high came last week at $339.93.
Writing for the Livestock Marketing Information Center’s weekly publication In The Cattle Markets, Steven Koontz, agricultural economist at Colorado State University, said, “The composite value is front and center for me as an indicator of demand going forward.
“The other historical indicator is the choice/select spread, Koontz said. “This value spent much of April below $10 per cwt and has just recently rallied into double digits. Last year the value rallied to better than $20 in April and spent much of the last half of the year between $25-$30.
“The current spread is historically seasonally weak,” he said.
SLAUGHTER STRONG
Somewhat counteracting the normal improved demand during the summer are strong slaughter volumes – especially of fed heifers – and the very strong counter-seasonal fed steer and heifer slaughter weights, he said. Fed weights were flat through March, April and May, so now there are almost 30 more pounds of beef per animal than last year.
It varies by the week, but there is almost 5% more beef from heavier slaughter weights, he said. And again, numbers are up compared to last year.
FRONT-LOADED CATTLE DIP
The cattle industry finally is seeing some reduction in long-fed inventories, Koontz said. Cattle on feed more than 150 days are still very strong compared to last year and strong compared to all but the peak of the COVID disruptions.
And, the market is seeing much-discussed reductions in beef exports along with the fact that packer cash margins continue to be very weak, he said. Summer demand will have to do a lot of work to create a strong price outlook through June for fed cattle.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $190.00 per cwt to $197.29, compared with last week’s range of $186.00 to $198.26 per cwt. FOB dressed steers, and heifers went for $295.27 per cwt to $308.27, compared with $291.73 to $303.78.
The USDA choice cutout Thursday was up $0.48 per cwt at $323.33 while select was off $0.16 at $302.70. The choice/select spread widened to $20.63 from $19.99 with 89 loads of fabricated product and 28 loads of trimmings and grinds sold into the spot market.
The weighted average USDA listed wholesale price for fresh 90% lean beef was $370.94 per cwt, and 50% beef was $103.16.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.50 to $1.60 a bushel over the Jul corn contract, which settled at $4.13 3/4 a bushel, down $0.06 1/4.
No delivery intentions were posted Thursday for the Jun live cattle futures contract.
The CME Feeder Cattle Index for the seven days ended Wednesday was $259.04 per cwt, up $0.73. This compares with Thursday’s Aug contract settlement of $260.65, down $1.12.