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Cattle Market & Farm Reports, Editorials
Dec 20, 2007
by WLJ

June 6, 2005

The summer doldrums have arrived as beef movement for Memorial Day, one of the first “bellwether” weekends for summer, came up shorter than expected. Aside from just a poor beef holiday and a bad beef weekend, analysts are starting to indicate that beef demand is undeniably down.
This summer market is starting to develop some normal seasonal bumps. Perhaps one of the big surprises was the number of heavy-weight cattle placed in feedlots last month. Cattle placements in the 800-pounds-and-over category were up 43 percent. Cattle-on-feed numbers were three percent up over a year ago.
Beef demand showed its first official decline during the first quarter of this year, and it is expected that the second quarter of 2005 will be flat at best. The balancing act of slaughter volume and carcass weights are starting to weigh on the market, showing that cattle are staying in feedlots a little too long. Carcass weights bottomed earlier than normal and are now nine pounds over the average for this time of year. Cattle feeders are resisting marketing cattle at below breakeven levels, and a familiar story is starting to emerge again in the cattle markets.
Slaughter may have the most profound effect on demand. Without the export markets, the normal expected weekly summer time slaughter of 700,000 head per week will not happen. Andy Gottschalk, analyst at HedgersEdge.com, is projecting a weekly slaughter demand base of 625,000 head, while he estimates weekly slaughter supplies at 660,000 head. For the year, the industry is 575,000 head behind last year’s slaughter level.
With numbers increasing, carcass weights starting to grow and beef demand starting to level off, many market analysts are expecting to see a summer low develop around $82. Some of the more pessimistic analysts said the market could move into the $70s, and this is without any Canadian market influence.
Speaking of Canada, the Ninth Circuit Court of Appeals announced that they will hear arguments on the temporary injunction regarding Canadian live cattle imports during the week of July 11. This was the injunction that Federal District Court Judge Richard Cebull granted R-CALF last March. Cebull will hold court on July 27 on whether to grant R-CALF’s request for a permanent injunction, which may include beef imports. Beef imports have been crossing the border for nearly two years.
If the Canadian border opens sometime in August or September it could compound the pressure on the market, where it wouldn’t have had much effect in March, when U.S. fed cattle inventories are generally at their low point.
Beef imports from Canada for the first quarter of 2005 were a whopping 32 percent over the first quarter of 2004; actually it’s only 20 million pounds, but 32 percent sounds more dramatic. However, Canadian beef imports are still not as high as they were the first quarter of 2003, which was 271.8 million pounds. Total beef imports for the first quarter of 2005 were down 6.4 percent.
I spoke to auction market owner Bob Balog from Lethbridge, Alberta, last week and it was his opinion that most of the talk about new packing plants was just that, mostly talk. There was one new plant underway, but for the most part it was the major packers just getting bigger. Tyson is following through with their plans to increase output to 900 head a day at its Brooks, Alberta, plant. It’s the American packing companies that are doing the expanding.
Meanwhile those dirty rotten packers are taking advantage of the situation, but there’s no reason to get angry at them because it’s only business. So with that said, the quickest way I can think of to fix that lopsided profiteering by opportunistic packers is to open the border to live cattle.
In the event the border does open, I would expect the market to balance out very quickly and take the easy money out of the Canadian packing industry. Then those packers wouldn’t be so eager to expand those plants and ship all that high margin beef to the U.S.
Regardless of what happens with all the legal issues with Canada, we still have the normal summer situation of stimulating beef demand and getting some of these cattle cleared out of the feedlots. — PETE CROW

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