Colorado State University Agricultural Economist Stephen Koontz said in a Livestock Marketing Information Center newsletter to Extension agents this week called In The Cattle Markets that strong domestic and export demand was fueling strong beef prices.
That shouldn’t be a big surprise, but Koontz added that
“if beef prices are strong and supplies are reasonably abundant then the only thing that it (the strong beef prices) can be is the strength in demand.
“This strong consumer demand is being revealed in retail prices and strengthening the wholesale and farm level prices,” he added.
STRONG FUNDAMENTALS
From a market fundamentals perspective, monthly beef production remains strong, running more than 1% above the year prior, he said.
The total volume for 2022 will be slightly smaller than 2021 and comparable to 2019, Koontz said.
“These are large volumes of beef,” he said.
Forecasts for the third and fourth quarter reveal drops in production but current weekly slaughter remains strong, Koontz said. These predicted declines have not yet materialized.
The USDA estimated last week’s cattle slaughter at 678,000 head, compared with the previous week’s 661,000 and last year’s actual of 653,000. Slaughter weights were mixed with last week’s average at 1,346 head, compared with the previous week’s 1,343 pounds and last year’s 1,358 pounds.
Q2 DOMESTIC CONSUMPTION LIKELY FLAT
Domestic consumption likely will be reported flat in the second quarter but was large in the first, Koontz said. Again, the third and fourth quarters were forecast to be lower, especially if strong beef exports persist. (Consumption is production minus net exports.)
Current monthly beef net exports for 2022 are on path to be record large, he said. (June’s were pegged by the USDA at 130,638 tonnes, versus 112,249 a year earlier.)
Retail beef prices spiked following the COVID shutdown to levels Koontz said he anticipated not seeing again for the foreseeable future. But those price levels were seen across much of 2019 and the market is close to those levels now.
Retail beef margins are very strong, he said. Forward or not, beef packer margins remain solid, and fed cattle prices are benefiting.
But the number of long-fed cattle remain persistent, Koontz said. Fed cattle were trading in the high $144-$148 level with some trades reported at $150. These are levels not seen since 2015.
And cash prices for feeder cattle in the week of Aug. 12 across several regional markets – Oklahoma City, Montana and Colorado – also were at levels not seen since 2015, he said. 700-750 Medium & Large Number 1 Feeder Steers in OKC were at $180.60 per cwt.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $142.00 to $147.63 per cwt, compared with last week’s range of $142.00 to $148.37. FOB dressed steers, and heifers went for $224.67 to $225.57 per cwt, versus $220.22 to $229.10.
The USDA choice cutout Tuesday was down $3.25 per cwt at $259.79 while select was down $3.07 at $239.68. The choice/select spread narrowed to $20.11 from $20.29 with 125 loads of fabricated product and 37 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $2.50 to $2.60 a bushel over the Sep futures and for southwest Kansas were unchanged at $1.00 over Sep, which settled at $6.79 3/4, down $0.04.
No contracts were tendered for delivery against the Aug live cattle contract Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $183.00 per cwt down $0.16. This compares with Tuesday’s Sep contract settlement of $182.17, up $2.25.