Domestic holiday sales weaker than expected
Fed cattle prices rebounded last week to post $1 gains in most market areas. In the southern Plains, early live cattle trade developed at mostly $94 last week, with analysts predicting clean-up trade at $95 if the outside markets managed to hold their ground. In the north, dressed trade developed at $154 last Thursday.
Packer margins were very good last week, which was contributing to an expectation for a 595,000-head production week despite the cut in Monday numbers due to the holiday. HedgersEdge.com estimated packer margins at $95.95 per head last Thursday. However, there is some expectation that those levels will start to decline as the cutout begins to fade lower. Holiday movement and post-holiday fill-in business was reportedly lackluster, indicating that consumers may be more reluctant to spend money than some market watchers had believed.
One major retail source indicated last week that retail sales for the traditional start to the grilling season failed to meet expected levels, adding to the caution signals flashing about the strength of the overall economic rebound in the U.S. He said retailers were mostly disappointed by clearance levels for the holiday and if the trend continues, it could cut into pricing during the summer, particularly as production levels ramp up.
Last week, analyst Troy Vetterkind from Vetterkind Cattle Brokerage noted that contrary to popular opinion ahead of the holiday, sales were lackluster, with the weakness even translating into the ground beef markets, which he called steady to weak.
"Loin meat remains on the defensive, while chucks and ribs held mostly steady. I thought perhaps we might see a little better buyer demand after the holiday but so far, it has yet to transpire," said Vetterkind.
He noted that similar declines were found in competing proteins, with sharp declines seen in the pork cutout and weakness in poultry prices reported. Vetterkind said instead of the pre-holiday expectations of a $1-2 bounce in boxed beef prices, he now thinks the industry will be more likely to see pricing flat at best in most primals.
"Keep in mind, we are going to get back to killing 670,000 head plus next week and that is going to last for awhile," said Vetterkind. "If the cash beef market is going to have a hard time handling a 600,000-head kill after a major holiday, guess what’s going to happen with 670 plus kills going into the 'dog days' of summer."
The bright spot in the markets continues to be the export trade, with good numbers continuing to help maintain prices in the face of questionable domestic demand for beef. South Korea, in particular, has been a strong buyer of U.S. beef despite a declining currency value, according to Washington State Extension economist Shannon Neibergs, who noted last week that since tensions began increasing on the Korean peninsula, the value of the Korean won has plummeted against the U.S. dollar, which makes American beef more expensive, although it has done little to slow buying.
Since the start of the year, foreign buyers have been providing a great deal of support to U.S. beef prices as a result of their purchases. According to figures obtained from National Cattlemen’s Beef Association (NCBA), exports for the past six weeks have exceeded those for the same period in 2003 prior to the discovery of bovine spongiform encephalopathy in the U.S. For the period of April 15 through May 20, 2010, exports have reached 97,682 metric tons, compared to 89,710 metric tons for the same period in 2003. For the year-to-date total, though, export number still lag those recorded in 2003. Through May 20, 2010, total exports were reported at 204,338 metric tons by NCBA, versus 285,079 for the same period in 2003.
The continuing growth in exports will be important to maintaining market prices until the U.S. economy reaches a better footing, encouraging U.S. consumers to return to the market in earnest.
Many early week markets were dark for the Memorial Day Holiday last week. However, there remains solid demand for the dwindling number of feeder and stocker cattle available in the country. The markets which did operate last week continued to report strong sales, with many posting gains for the week. Last week in El Reno, OK, feeder steers sold $2-4 higher. Feeder heifers were steady to $2 higher. Steer calves were called $2-3 lower on a light test and heifer calves were $2-3 higher on a light test with demand for all classes on offer called moderate. In La Junta, CO, light steer calves sold steady from $117.50 to $135 while heavier classes were also steady from $105 to $125 on a light test. Heifer calves were steady in a range of $110 to $126 with heavyweight offerings in a range of $105 to $121. Farther west in Clovis, NM, last week, the light offering of feeder cattle was called steady with the previous week’s sale.
On the West Coast in Cottonwood, CA, there was good buyer demand reported for the light run of cattle on offer. Cattle in the 650-800 lb. class were called $3-5 higher while those over 800 lbs. sold $2 higher.
Farther north in Vale, OR, the market was a little softer on most classes of cattle than at the prior week’s sale, with 500-600 lb. steers selling in a range of $118 to $130 while heifers in the same class were $18 back. The 700-800 lb. steers sold in a range of $93-107 while heifermates brought $92-98. And in Blackfoot, ID, the market last week was called $2 lower than the prior week on a light run of cattle. Five hundred to 600 lb. steers sold in a range of $110-130, while heavier 700-800 lb. offerings sold between $94 and $104. Heifers were generally $4-5 back in most classes. — WLJ