Summer Heat Shrinks Beef Demand

Summer heat appears to be taking a bite out of retail beef sales as outdoor temperatures become too uncomfortable to stand over a grill.

Futures traders are firmly in the camp of those who are cautious about the bullishness of beef market possibilities into August, taking the nearby Aug contract Tuesday to three-month lows after the Independence Day holiday.  Further declines in fed cattle prices may not be necessary if beef can catch a toe-hold with consumers.

“When the market heads south, the question always arises as to how low will the market go and when will it turn around, said University of Tennessee Agricultural Economist Andrew Griffith in a weekly letter.

“It will be difficult for the (cattle) market to move much lower considering it is already $20 per cwt off its yearly high,” Griffith said.  “There is potential for a few more dollars to be lost, but the likelihood of prices disintegrating is very small.

“Live cattle prices will rebound this fall, but it would not be wise to expect them to exceed last fall’s peak price,” he said.




A look at weekly price graphs for beef and cattle suggests a low for fed cattle may already be in, but a low for wholesale beef prices may be yet to come.

If the seasonal low in cash fed prices is in already, a subsequent recovery may be vague, especially until the normal seasonal bounce occurs the first week of August.  Traders may refuse to believe in the viability of a rally without a concurrent rise in beef prices that coincides with a seasonal rally.

As it is, one trip outside to do much of anything convinces them that potential beef grillers are likely to stay inside and eat cold cuts, which generally are ham or turkey, not beef.




The fall in beef prices is eating into packer margins, and predictions for more beef production this year, despite short cattle supplies, doesn’t bode well for the processor.

The USDA’s World Agricultural Supply and Demand Estimates, which were released Friday, showed an estimated 2015 beef production estimate of 23.82 billion pounds, 0.5% more than WASDE estimated a month ago.

Cattle feeders are having a big say in that as better pastures this year allow calves to grow to larger weights before entering the feed yard for fattening.  And larger calves in mean larger cattle out, which equals more beef per head and larger annual beef production.

Cattle feeders are struggling with negative margins on every head sold to packers, and the natural response is to grow the cattle as large as the packer will take them before sending them to town and buying expensive feeder cattle replacements.

Next year also should see the first fruits of the cattle industry’s herd expansion program hitting the fed cattle market.  The WASDE report estimated 2016 beef production to be up 4.3% from 2015’s upwardly revised estimate.




Cash cattle markets remain quiet with no fed cattle changing hands yet this week.  Bids were reported at $146 per cwt on a live basis with asking prices at $152 to $153.  In dressed-basis markets, cattle were bid at $232 with asking prices holding near $245.

Plains markets last week saw a mostly steady $150 market.  Dressed-basis cattle traded last week at $238 to $241, also about steady.

The USDA’s afternoon choice beef cutout value was down $1.10 per cwt at $234.94, while the select value was $233.71, off $0.25.  Volume was very heavy at 187 loads of fabricated product being sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Tuesday was $224.12 per cwt, down $0.23, compared with the Aug settlement of $215.32.