Monday’s monthly USDA Livestock, Dairy, and Poultry Outlook reduced its beef production forecast for first-half 2018 on an expected slower pace of fed cattle slaughter and lighter cattle weights.
More fed cattle were expected to be slaughter and at heavier weights in the second half of 2018, annual beef production was pared about 50 million pounds to 27.6 billion pounds from last month’s estimate.
The change largely reflects a combination of a slower-than-expected pace of fed cattle slaughter and lighter cattle weights in first-half 2018, the USDA said. First-quarter 2018 was characterized by lower fed steer slaughter and a higher proportion of heifers and cows slaughtered, relative to the total slaughter mix of a year earlier.
Heifers and cows typically are smaller and yield lower carcass weights than steers. As a result of fewer expected fed steers slaughtered and proportionally more cows and heifers slaughtered, weights and production were reduced for first-half 2018.
H2 DRESSED WEIGHTS SEEN HIGHER
In second-half 2018, dressed weights were expected to rebound as a larger number of fed cattle marketings were expected in the third quarter, the Outlook report said. Based on the latest National Agricultural Statistics Service Cattle on Feed report, the percent of cattle on feed over 120 days increased in March for the third consecutive month.
To the extent that cattle are on feed longer, weights will likely increase, and also the number of cattle that are market-ready, the USDA said. However, the increase in aggregate slaughter numbers and average weights only partly offsets the lower first-half production.
The expectation for increased marketings of fed cattle and increased beef supplies in the fall will likely exert pressure on fed-cattle and beef prices, the report said.
Q1 BEEF DEMAND FIRM
Weekly average prices for fed steers in the USDA’s five-area marketing region fell from a mid-February level of $129.93 per cwt to $120.96 per cwt to close out the first quarter. During this time, beef demand appears to have remained firm based on higher to-date beef production and higher year-over-year wholesale prices, the report said.
Strong wholesale prices and lower fed steer prices have supported packer margins at a time when they should be declining seasonally, the USDA said. With the forecast pending increase in fed cattle slaughter, second-quarter steer prices were expected to trend even lower to range from $114.00 to $118.00 per cwt.
The steer price forecast also was lowered to $106.00 to $114.00 per cwt in the third quarter and to $108.00 to $118.00 per cwt in the fourth quarter.
CATTLE, BEEF RECAP
On the Livestock Exchange Video Auction Wednesday, 232 head of Nebraska cattle sold at $118 per cwt; 127 Kansas cattle sold at $117.59, and 59 head of Texas cattle sold at $114 with a 17- to 30-day delivery window. Cattle sold the previous Wednesday at $117 per cwt.
Early week cash cattle were at $117 to $118 per cwt on a live basis, the top of last week’s $115 to $118 trade. On Friday, they were up to $118 to $120 in Kansas and $121 to $122 in Nebraska. Dressed-basis trading was at $190, steady to down $2 from the previous week.
The USDA’s choice cutout Monday was down $0.82 per cwt at $211.79, while select was up $0.07 at $199.98. The choice/select spread narrowed to $11.81 from $12.70 with 81 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday, was $137.59 per cwt, up $1.17. This compares with Monday’s Apr settlement of $139.22, down $0.15.