Cash cattle prices last week were steady to $1 per cwt higher than the previous week, yet weekly wholesale beef prices were down, a mixture that makes little sense unless weather is added to the price formulas.
Live cattle futures Tuesday settled moderately higher amid weather concerns as a new storm is forecast for the Western Midwest next week and advances in US stock indices. However, the USDA’s beef cutout prices ended lower after being mixed at midday.
“The market has not known what to do for several months now and no change to that situation seems to be in sight,” said Livestock Market Extension Economist Andrew Griffith from the University of Tennessee. “Neither logic nor common sense can explain live cattle futures making a positive movement while the beef cutout price is declining.
Cash cattle traded last week at mostly $134 to $135 per cwt on a live basis in the Plains, compared with $133 to $134 the previous week. At the same time, the USDA’s weekly choice boxed-beef cutout value dipped $5.94 per cwt, or 2.53%, to $228.73 from $234.67.
Cash prices for both are below year-earlier levels but above the 2010-2014 average, a position many expect to hold at least for the first half of 2016.
“The cold and nasty weather conditions do support live cattle prices as cattle performance tends to slow with cold and wet weather,” Griffith said. “Alternatively, beef cutout prices tend to falter when large parts of the US population are adversely impacted by weather.”
The winter storm that slammed the East Coast will most likely result in a slowdown in beef movement as consumers hunker down for the storm and then dig out. An initial raid of grocery stores for supplies usually gives way to less demand as consumers chew through their pre-storm purchases.
Restaurants are hurt the most as customers are kept away, munching less in emergency food purchases than they would if they visited the restaurant.
Additionally, the snow, ice and clogged roads make it difficult for beef and other goods to be trucked into the densely populated areas of the Northeast and the Atlantic coast. A severe winter storm is not new to the beef industry as at least one happens every year, but the greater the number of people affected by an individual storm, the larger the negative effect on wholesale prices.
But regardless of the weather, Griffith said he expected beef cutout prices to falter over the next few weeks as middle meat prices struggle through the slower demand months. End meats and trimmings were expected to carry the cutout for the next couple of months.
“It is actually amazing that cattle buyers have any clue what to pay for calves and feeder cattle given the volatility in the futures market,” Griffith said. “The roller coaster ride on the futures market continues to be anything but fun for those trying to manage price risk or even at a minimum trying to price cattle in the daily market.”
Market volatility has been a bane of cattle feeders for months. It has been impossible for feeder cattle buyers to hedge purchases profitably. As more cattle feeders reach the end of their liquidity, feeder cattle prices work lower as potential buyers increasingly are shunted to the sidelines.
CASH CATTLE QUIET
Cash cattle markets Tuesday were quiet with with no packer bids and asking prices holding at $137 to $138 per cwt on a live basis and around $215 on a dressed basis.
Cattle trade last week was mostly $133 to $134 per cwt live and $202 dressed.
The USDA reported lower wholesale beef prices Tuesday, with choice down $0.78 per cwt at $223.01, and select off $2.52 at $216.42. The choice/select spread widened to $6.59 from $4.85 Monday, and there were 122 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Monday was $158.44, up $0.90. This compares with the Jan settlement Tuesday of $161.10, up $0.87.