Apr 17, 2009
COMMENTS Market forces

Last week, the boxed beef cutout rallied around $10 from the previous week based on lower processing numbers. Cattle sold at $86 two weeks ago and moved up to $89- 90 on the cash market last week, which should put some profit back in the picture for both cattle feeders and packers.

Things are slowly moving in the right direction in the cattle markets. Daily slaughter numbers would suggest that packers will process more cattle last week than the week prior. Word is that they had to step up processing to stay on top of their orders for retail features. The middle meats are priced well enough that retailers should have some good beef featuring soon. USDA came out last week and raised their initial beef production forecast, saying that 2009 production would be 2 percent larger than originally forecast. They are estimating annual beef production at 26.4 billion pounds. Their reasoning for the increase is the current heavy processing weights of fed cattle and the fact that there are still plenty of beef and dairy cattle going to town. This is still about 200 million pounds less than 2008. So what are the markets going to do? It appears that the economic panic is over and consumers are starting to consume. Cattle numbers going into summer are expected to rise somewhat in feedlots and according to Jim Robb at the Livestock Marketing Information Center, we may see our summer bulge of fed cattle in July or early August. He said not to expect the market prices to build this summer like they did a year ago. Futures speculators were a big part of last year’s rally and not many of them are there this year. Although, the word is that a few of the speculators are starting to come back into the market and it doesn’t look like a good time to short the market.

Robb also said the competing meats could pull beef prices up soon. He expects to see boneless/ skinless chicken breast move up to $1.50 a pound and chicken exports have been rather good. Broiler production was down 7 percent for the first quarter of 2009 and is expected to drop another 6 percent in the second quarter of the year. Hog prices are also set to go higher, based on typical seasonal supply and demand. The hog market hasn’t had much sow liquidation lately and appears to just be waiting for the seasonal market shift.

With higher poultry prices and rising seasonal hog prices, it could have a positive price effect on beef sales. Robb says the two things to keep an eye on are Memorial Day beef sales, in order to gauge the summer beef market, and corn prices, which will have an influence on feeder cattle prices and cattle feeder profitability.

Ag Secretary Tom Vilsack held a roundtable meeting on the National Animal Identification System (NAIS) last Wednesday. Apparently, it was simply to bring him up to speed on the issue. All the major players were there. I still don’t expect to see any congressional minds change on moving animal ID to a mandatory scheme, but having the opportunity to guide Vilsack’s thoughts on the issue should be beneficial. We need to pray that this thing stays out of Congress.

I thought it was interesting that some cattle groups were opposing NAIS because it would force everyone to source and verify cattle, which would ultimately reduce or eliminate the market premiums that are currently seen for the programs.

These were the same groups that supported country of origin labeling in order to differentiate U.S. product from the rest. On one hand, they want federal protection from a market, and on the other hand, they want market forces to guide the ID process.

The only good news about NAIS is that a federal court said that any information gathered under the system would be off limits to any prying eyes and would be protected from being distributed under the Freedom of Information Act. Finally, we have not filled all the seats on the WLJ Arizona Ranch Tour and can still fit another four to six people. I know I told some folks that we were close to full, but we got a bigger bus. Now we have plenty of room without overcrowding. So, if you are interested in visiting some fine ranches and scenic country in Arizona with us, contact me right away. — PETE CROW