All markets move higher

Cattle Market & Farm Reports, Editorials
Apr 18, 2005
by WLJ
Fed cattle trade was stronger last week on very light trade volume. Northern Plains feeders started trading Wednesday afternoon establishing the live market at $149 dressed while Southern Plains feeders were holding the line at $92, which is where most live trade occurred. The fed markets were generally $2.00 higher over the bulk of the prior week’s trade. Only 66,000 head traded on the national scene as of Thursday afternoon.
Meat traders are having a difficult time trying to figure the market out and have adopted a hand-to-mouth buying pattern. There was some light featuring at the major grocery stores last week, and some retailers are only featuring beef as a “percent off” the regular price rather than a fixed price because of the erratic meat markets. Retailers can offer better features with poultry and pork products rather than beef.
Slaughter volume has been marginal with only 582,000 head passing through packing plants during the week ending April 5. The industry should start to see slaughter volume grow, but that will be difficult because finished cattle just aren’t there.
Last week daily slaughter was slightly softer with 462,000 being processed through Thursday 8,000 head below the pace the week before. The latest packer margin index showed packers earning $7.00 per head on an average buy of $90.48 and an average production cost of $91.07
Perhaps the most interesting development in the market is the Choice-Select spread, which is at $16.64. It’s normal to see the spread widen at this time of year, but it has happened very quickly and is wider than normal. The cutout would also suggest that Choice product isn’t getting any greater value, but Select is being discounted more. The latest choice cutout was at $155.51. And Select was at $138.87. These meat markets have a softer tone to them as boxed beef movement is moderate and erratic.
The cow beef cutout was at $116.47 down several dollars from a couple weeks ago. And the 90 percent lean product was also down $10.00 from a couple of weeks ago. With lighter cattle and fewer Choice cattle, there is much less fat on the market; 50-50 trim has gone ballistic and is trading at $92.03 where a normal trade range would be in the $40s.
Jim Rob at the Livestock Market Information Center (LMIC) said that a more normal pattern of imports is resuming on the lean beef, which has put pressure on the component used for hamburger production. We may have seen the slaughter cow and bull market top out last week, when some $70 slaughter cows were reported.
Carcass weights were starting to make their seasonal down trend. The LMIC reported that from January through early April, Federally Inspected (FI) cattle dressed weights averaged nearly 15 pounds above a year ago. Some of the year-to-year increase in average cattle weights has been due to heavier cow weights coupled with relatively small cow slaughter. Slaughter steer and heifer weights also have been above a year ago. But, so far this year cattle weights have been rather normal from a seasonal perspective.
By late March, FI steer dressed weights averaged 806 pounds compared to 796 pounds last year, a yearly increase of 10 pounds. For the same period, averaged dressed weights for steers were only 3 pounds heavier than the prior five-year average weight of 803 pounds. On a weekly basis, steer weights have seasonally declined most every week this year. Last year, steer weights bottomed out in late April and should post a yearly low in late April again this year. At the end March, FI heifer dressed weights averaged 747 pounds, 14 pounds heavier than 2004’s and around 4 pounds heavier than the prior five-year average. On a weekly basis, heifer weights have declined on average 2.5 pounds per week since the beginning of the year.
Feeder cattle
Feeder cattle and calf prices were stronger than the prior week. A limited supply of yearlings is keeping feeders very aggressive on buying replacements. The latest feeder cattle index was at $110.
Feeder steer prices last week at Oklahoma City were steady to $2 higher with exception of seven weights, which were up to $4 higher than last week. Feeder heifers were steady to $1 higher and stocker cattle were steady with seven days earlier at Oklahoma City.
Stocker cattle are probably close to their seasonal high for the year. However, all replacement type young animals are expected to continue very strong.
When the Canadian border opens to live cattle the prices of feeder and stocker cattle are likely to be pushed lower. But the border is not likely to be opened for at least two months and may be longer. The court system moves quite slow, said Ron Plain, economist at University of Missouri. Jim Robb at the LMIC said that lightweight cattle prices have surged to new all time highs. Most of the recent price spike-up can be attributed to producers buying lightweight cattle for spring/summer grazing programs. In the Southern Plains and Southeast, many of the lightweight cattle for pasture have already been purchased and most of the recent price strength was in the Midwest and Central Great Plains where pasture green-up will begin in the next few weeks.
Lightweight cattle prices have posted the largest increases. In the Southern Plains, for the first quarter of 2005, the year-to-year increase in 500- to 600-pound steer prices was $19.39 per cwt. over a year ago (18 percent). For the quarter, the annual price increase for 700- to 800-pound steers and slaughter steers was $14.92 (17 percent) and $8.82 (11 percent), respectively.
Besides good grazing in most of the U.S., with notable exceptions in parts of the Northern Plains and Pacific Northwest, fundamental support to feeder cattle and calf prices has come from several sources. The key sources of price support include: 1) cyclically tight feeder cattle supplies; 2) rather strong slaughter steer prices; and 3) large year-to-year declines in corn and other feedstuff prices.
On a quarterly basis, lightweight feeder (under 600 pounds) cattle prices are forecasted to set an all time record high in the second (spring) quarter of 2005, eclipsing the levels set last summer. Calf prices will likely remain strong for the balance of the year, but are forecast to be below 2004's by the fourth quarter of the year. Still, U.S. operations are expected to receive calf prices this fall that are the second highest ever for that quarter. But, 12 percent below a year earlier. For calendar year 2005, cash calf prices are forecast to be above 2004's, setting a new all time high. They are also forecast to set the annual high for this cattle cycle.
Feeder steers (700-800 lbs.) prices are expected to remain strong in 2005 with annual average prices slightly below 2004’s. Red ink for cattle feeders will limit upswings in feeder cattle prices for the balance of 2005 and will likely keep prices below 2004’s for the last half of the year. In the Southern Plains during last summer’s quarter, 700-to 800-pound steer prices averaged over $117.00 per cwt., a price level will likely not be eclipsed again this cattle cycle, said Robb.
After strong year-to-year increases for slaughter steer prices in early 2005, the balance of the year will bring slight increases, at best. For the remainder of the year, slaughter steer prices are forecast to mirror the normal seasonal pattern, setting seasonal lows this summer. Of course, uncertainty on the international trade front hangs over the outlook. Slaughter steer prices are forecast to average in the mid- to upper-$80s per cwt. in the second quarter, down $1.00 to $4.00 from the first quarter average. Prices will follow the seasonal trend this year, bottoming out in the third quarter, averaging in the low $80s per cwt. For the fourth quarter, prices may struggle back up to the mid-$80s. A very strong first quarter could pull the annual average slaughter steer price for 2005 slightly above 2004’s. — WLJ

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