Rising Beef Production Clouding Cattle Price Outlook

Fed cattle prices have taken a decided bounce the last two weeks, but rising beef production could prove problematic for feeders trying to get more.  In fact, the bounce already is running into trouble.

Since bottoming at $123.84 per cwt on a live basis the last week of April, Southern Plains slaughter cattle prices have risen $8.63, or 6.97%, to last week’s $132.47.  However, this week’s cash price range is coming in $1 to $2 per cwt lower, and if the trend continues, the average price result is liable to turn line on a price graph lower.

AMS data show that average fed cattle prices for 2010-2014 tend to fade from early April into June before beginning a slow rise into the November high.

The data also show that prices last year disregarded the average and generally moved lower into late September where holiday demand pushed the market into late October.  Rising supplies of beef amid climbing carcass weights, along with a milder summer kept pressure on the market until holiday beef demand gave the market its fall push.

 

RISING BEEF PRODUCTION AN ISSUE

 

Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, penned an article Thursday saying “beef production will likely trend higher in the second half of the year, but carcass weights may partially offset increased cattle slaughter.

“The recent decline in carcass weights may not be done yet, and carcass weight may drop below year earlier levels for much of the second half of the year,” Peel said.  “Steer carcass weights have declined 62 pounds from the October peak last fall.  This compares won an average fall to spring seasonal decrease of 41 pounds the last five years.

“A typical seasonal increase in carcass weights this fall from current levels would leave steer carcass weights 10 to 20 pounds below the record carcass weights from the fall of 2015,” he said.  “This will depend on whether feedlots continue to market cattle aggressively and maintain a faster turnover rate.”

AMS and National Agricultural Statistics Service data show federally inspected steer slaughter rising seasonally and moving above the 2010-2014 average.

It’s this rise in slaughter that could thwart feedlot efforts to continue the latest cash price rally.

 

CASH CATTLE MARKET $1 TO $2 LOWER

 

Cash cattle markets so far this week are $1 to $2 per cwt lower at $131 to $132 on a live basis.  All showlist cattle have not traded, however, as feedlots were asking $136 to $137 live.  In dressed markets, bids were posted at $205 to $206 against asking prices of $215.

The USDA’s choice cutout Thursday was lower at $227.16 per cwt, down $0.60, while select was off $1.05 at $211.15.  The choice/select spread widened to $16.01 from $15.56 with 66 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $148.29 per cwt, down $0.16.  This compares with the May settlement Thursday of $148.27, down $1.22.