Retailers win with lower boxed beef values
Ideas that the early warm weather across the central part of the U.S. could spark early summer-type demand helped support last week’s market. In addition, a more active volume of trade in the boxed-beef market boosted support levels. A positive tilt to equity markets and weakness in the U.S. dollar added to the positive tone.
Despite the early warm weather, cash cattle was slow to develop last week, with just a few bids of $124 reported in parts of the south, with asking prices at $129-130. Caught between relatively tight feedlot supplies and slumping carcass value, beef processors delayed tracking down inventory as long as possible. Asking prices in the north were at $203-205.
The previous week, cash fed cash cattle prices ended $2–3 lower in the south Plains and Corn Belt, at $126-127. Corn Belt dressed prices traded $4 lower, at $201- 202.
Chicago Mercantile Exchange live cattle contracts settled 72 to 110 points higher midweek on a combination of commercial and noncommercial support stepping into the market, analysts said. Outside markets were stronger and leant additional support to futures. April settled 97 cents higher at $127.72, and June was up 90 cents at $124.80.
A few weeks ago, for no apparent reason, cattle futures began a quick and steep decline, sending most contracts down $7, a large move in any market. Moves like this define volatility and create lots of discussion among analysts trying to decide who really has the power to move the market like this. But almost everyone who lives in volatile markets has felt the exhilaration of making a bet on the market direction and having the market confirm the judgment.
“Retail sales slowed last week, with few items showing Y/Y gains. There was no change in the pattern of weekend sales. The weakness proved to be across the board, with pork and chicken sales also slowing. It is apparent that higher gasoline prices are taking their toll on consumer meat spending. We expect to see continued selling pressure on beef product,” said Andy Goottschalk with Hedgersedge.com.
Despite the slower sales, the trading up to midweek was favoring retailers who are adding boxes at lower prices each day. The slaughter plants have been reporting very high grading percentages, which also might be some reflection of the finish, according to analysts.
Boxed beef cutout values were lower, with the Choice down 1.62 at 190.51, and Select was 1.29 lower at 189.61. The industry was looking at a 620,000-head production week.
“Carcass weight data continues to confirm that this industry is losing ‘currentness.’ Steer carcass weights are 24 pounds above the previous year while heifer weights are 19 pounds over year ago levels. Beef demand is already suffering at current retail price levels, and we should anticipate additional retail price advances in the coming months,” Gottschalk said.
“Beef exports YTD have shown a modest gain Y/Y, while beef imports have posted a large gain. One positive aspect for the cattle and feeder complex is that
these markets are becoming ‘oversold.’ This should limit intraday selling pressure, barring negative action in the outside markets,” he added.
Weekly U.S. beef export sales for the week ending March 8 came in at 8,800 metric tons, compared with the prior four-week average of 17,500. Cumulative sales for 2012 have reached 227,800 metric tons, up 0.5 percent from last year’s pace.
Even though it is only mid-March, buyers are looking for stockers that can immediately take advantage of early forage and don’t need extensive preconditioning. The nation’s fourth mildest winter on record has most feeder cattle coming through the winter in a fleshier condition than normal, which is not what most backgrounders are looking for as they would rather purchase winter-weary turnouts with compensatory gain.
In addition, the value of heifers has become twopart, creating a new market phenomenon, according to Derrell Peel, Oklahoma State University. The shrinking gap between steer and heifer prices is being fed by the tremendous market opportunity of heifers in two arenas, feeders and replacements. Heifers are being sold at or above comparable steer market prices, and Peel said we can expect to see this unusual trend continue for the next couple of years.
Feeder cattle receipts were estimated at 319,800 head versus 356,200 head the prior week and 211,200 head last year. Feeder prices were mostly $4 lower.
Calves were mixed, up $5 to down $5.
“Demand for grass cattle will continue to lend support to the calf market. Unless fed cattle prices find support at current levels, feeders and calves should encounter additional selling pressure. Feeder/fat relationships remain at the upper end of recent limits,” Gottschalk said.
Traders focused on the continued support in outside markets. March was up 1.17 and settled at 155.52; April was 1.40 higher at 159.02.
At the Oklahoma National Stockyards, Oklahoma City, OK, feeder cattle and calves closed strong on Monday but by Wednesday, they averaged steady.
Demand was moderate to good for all classes. Futures made a turnaround to close on the plus side and this helped to drastically improve demand. Numbers were reduced just slightly last week because of some moisture over the weekend. Supply included 72 percent over 600 pounds and 36 percent heifers.
Feeder cattle receipts at the Tri-State Livestock Auction at McCook, NE, totaled 1,700 head. Compared to a week ago, steers and heifers were steady to $3 lower, except heifers weighing 650 to 750 lbs. were $1–3 higher. Feeder steers, medium and large weighing 827 pounds, averaged $143.25 per cwt. and 825 pound heifers brought $138.75 on average.
Feeder cattle were $4-8 lower on a good test at Torrington, WY, on Wednesday, but replacement quality breeding heifers remained very active. Nearly 750 head of 600-750 pound open heifers from Torrington sold for replacements with an average weight of 658 pounds and an average price of $162.33, or nearly $1,070 per head. This week’s reported auction volume had 57 percent over 600 pounds and 45 percent heifers.
In Moses Lake, WA, feeder cattle were $1-5 lower following losses on the CME board of trade. Trade was slow with light to moderate demand as some feedlots in Idaho are at capacity levels. The feeder supply included 54 percent steers and 46 percent heifers. Near 92 percent of the supply weighed over 600 lbs. — WLJ