While they have recovered in the last two weeks, fed cattle and beef market prices slowed earlier this month and, in some cases, reversed moves from those into record highs, said Stephen Koontz, agricultural economist at Colorado State University, in a Livestock Marketing Information Center letter called In The Cattle Markets.
FIVE-MARKET PRICE
The weighted average five-market fed cattle price retreated into the $230s while prices in the southern plains held onto uncharacteristic strength – with southern cattle priced at a premium to those in the north, Koontz said. But it is that time of year when northern cattle are more abundant and tend to be rather long-fed.
The USDA boxed beef composite value has retreated from the peak of $413.60 per cwt seen around Labor Day to $365.25 two weeks ago, he said. The choice/select premium is solid, close to $16 per cwt.
At the same time, cow-beef composite values are about $320 per cwt after peaking at about $335, Koontz said. Second-half cow slaughter declined versus last year, and strength is expected to persist in the non-fed beef market. Fed steer and heifer slaughter also weakened some with heifers reduced the most.
PRICE IMBALANCE?
Those combined numbers suggest some level of herd building to be revealed or confirmed in the January USDA Cattle report, he said, but the market effect of this is higher prices in the short term before supplies expand.
However, when the numbers are worked, DEC live cattle futures are much stronger than that implied by supply and demand fundamentals, Koontz said. The tight placements through much of the summer were much smaller than the increases in slaughter weights, so higher cattle and beef prices are to be expected.
Substitute meat prices do not offer a clear signal either, he said. Higher pork prices largely are offset by lower chicken prices.
Income and disposable income remain strong but also are substantially offset by 3% inflation, he said. A back-of-the-envelope forecast suggests a fed cattle price closer to $220 in December rather than a futures price around $239.
Imports and exports only reinforce that perspective, Koontz said. Exports will be challenged by record-high-priced beef regardless of the weakening dollar, and import volumes themselves likely will set records with non-fed beef supplies tight and tightening.
Clearly there is very strong domestic beef demand, he said. Consumers and food service providers are willing to pay the good 10% more than fundamentals suggest.
Market analysts should be keeping an eye on the composite value and values of the main primals, he said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $237.30 per cwt to $243.00, compared with last week’s range of $234.39 to $237.11 per cwt. FOB dressed steers and heifers went for $368.29 per cwt to $377.16, compared with $365.05 to $373.86.
The USDA choice cutout Wednesday was down $1.28 per cwt at $370.65 while select was up $1.04 at $353.61. The choice/select spread narrowed to $17.04 from $19.36 with 136 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $409.73 per cwt, and 50% beef was $146.17.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.00 to $1.10 a bushel over the Dec corn contract, which settled at $4.23, up $0.03 1/4.
No new live cattle delivery intentions were tendered Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $372.00 per cwt, down $0.99. This compares with Wednesday’s Oct contract settlement of $365.07, down $7.85.