First-quarter US meat production was up more than 2% than a year earlier, and continuing increases are likely to pressure fed cattle prices, said Purdue University Agricultural Economist James Mintert in “farmdocdaily.”
The increase in meat production took place virtually across the board as all major meat production sectors, except turkey, posted year-over-year increases, Mintert said. The largest percentage increases were in pork, up 3.7% and beef, up 2.6% followed by chicken production, up 1.4%.
CATTLE PRICES STRONG, DESPITE PRODUCTION GAINS
Despite the relatively large Q1 meat production increase, fed cattle and feeder cattle prices were stronger than a year earlier, he said. Prices for Southern Plains slaughter cattle, for instance, were able to remain above a year earlier for most of the quarter, averaging more than $125 per cwt on a live basis, compared with about $122 in 2017.
Fed cattle price strength helped support prices for eastern Corn Belt steer calves and feeder steers as both averaged well above a year ago during the quarter, Mintert said.
However, unlike fed cattle, much of the relatively large year-to-year price increase in calves and feeders was attributable to very weak prices in early 2017. Prices for 500- to 600-pound Kentucky steers averaged $160 per cwt this year vs $135 in 2017, and prices for 700- to 800-pound feeder steers averaged $141 in Q1 2018 vs. $121 in 2017.
First-quarter price strength showed signs of disappearing as the quarter progressed, and by late April, Southern Plains fed steer prices were trading in the low $120’s vs near $130 a year ago, he said.
Kentucky feeder steer prices were trading near $136 compared to $135 in 2017 and still were higher than in 2017, the difference of $3 was much smaller than during January and February.
WHAT TO EXPECT
Looking ahead to the rest of this year, the biggest driver of prices will be US meat production, and it looks like 2018 beef, pork and chicken production will all be larger, Mintert said. Beef production, in particular, could provide substantial year-over-year increases.
One key factor is fed cattle supplies, which will be substantially larger than in 2017, he said. The April 1 on-feed inventory was up more than 7% compared with last year and was the largest April on-feed inventory since 2006.
The expected rise in fed cattle marketings will help push average slaughter weights up, resulting in a larger production increase than cattle slaughter alone would suggest, Mintert said. Increases in beef and dairy cow slaughter also will help push beef production higher. Production could be up 6% to 8% over the next six months, he said.
CATTLE, BEEF RECAP
There were no sales on the Livestock Exchange Video Auction last Wednesday. The previous Wednesday, 161 head sold for 1- through 9-day delivery at $122 per cwt, and 338 sold for 1- through 17-day delivery at $120.
Early week cash cattle trade last week was reported at $120 to $121 per cwt on a live basis, down $1 from the previous week and lightly at $195 dressed, steady with the upper end of the previous week’s range. However, Friday trade was at $124 to $126 live, up $3 to $4, and at $198 dressed, up $3 to $7.
The USDA choice cutout Tuesday was up $2.01 per cwt at $226.43, while select was up $2.30 at $207.09. The choice/select spread narrowed to $19.34 from $19.63 with 85 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday, was $139.27 per cwt, down $0.04. This compares with Tuesday’s May close of $137.90, down $2.27.