Media hype wreaks havoc on markets
Fed cattle prices started last week steady with the prior week. Compared to the previous week, live sales sold $1 lower at $125 in Kansas. In Nebraska, dressed sales sold $1-2 lower at $202 with live sales on Wednesday from $126-127. In the western cornbelt, compared to the previous week, live sales sold steady to $2 lower from $126-128 with dressed sales $1 lower at $202.
Analysts continued to discuss an oversold cattle complex. Midweek futures closed above near term support at $124/$120 in April/June live cattle, respectively. “My fear is that either [this] week or [next] week all of a sudden packers need to kill 640,000-650,000 head of cattle per week to get end meats to grind and we see a big jump in cash and futures. Maybe that doesn’t happen, but given what’s going on in that part of the business, ground beef demand is something you just don’t shut off and if you have to find different sources of grinding material, then that’s what you do,” said Troy Vetterkind of Vetterkind Cattle Brokerage.
Packers estimated a processing count of 600,000 head for the week but with the expectation of late week increases to fill the ground beef demand hole left by the lean fine textured beef (LFTB) consumer controversy.
Cutout values were diminished by widespread packer discounting of inventories to clear out backlogged product. The week started with Choice beef cutout at $187.41 and Select cutout at $186.57, both down by over $1. Throughout the week, those numbers continued to decline, with Thursday morning seeing Choice cutout at $184.24 and Select cutout at $184.32. Overall 90 percent lean ground was strong at $218.
“Middle meats were the biggest drag on cutout values… with loin items receiving the biggest discounts,” said Vetterkind.
Lean boneless processing beef and trimmings prices were mostly weak to lower, according to a US- DA report. Consumer concerns about ground beef safety in the midst of the flap over LFTB, weaker food service demand, and lower prices for competitive proteins continued to pressure trimmings prices.
The fallout from the negative press given to LFTB continues to plague the market, exerting pressure on ground beef and trim values. The previous week’s production was estimated at 605,000 head versus 619,000 head the prior week and 633,000 head last year. Beef production YTD is down 3.5 percent from the prior year, while slaughter is down 5 percent. But analysts point out the Y/Y percentage change differential is due to rising carcass weights. Average carcass weights are 19 pounds above the previous year.
Despite current packer discounts and losses on live cattle—estimated at just over $100 a head by CME Group—demands for middle meats are expected to increase as retailers anticipate Easter consumer demands. Expectations of higher demand for end cut whole muscle cuts also exist to fill ground beef demands in light of consumer rejection of LFTB.
“If we are to take anything from the hysteria over lean fine textured beef I would say that it is bullish in the cash beef market, especially end meats as I can only imagine that boneless cow 90s go through the roof now, which means cheaper priced chucks, rounds and thin meats will begin to fit into grinding formulations once that happens,” said Vetterkind.
Recent rains may curtail movement of cattle off pasture in a broad region across the southwest and southeast. Pasture operators wanting to restock are finding fewer offerings.
Oklahoma City cattle auction was active with good demand and higher prices. Yearlings were $3 higher and calves $5 higher. A 750 pound feeder steer was selling for $155 on the Southern Plains.
The huge rainmaking front that parked itself over most of the Plains and the Midwest for much of the previous week brought much needed moisture from south Texas to northern Iowa. The persistently wet weather curbed receipts and dampened demand in some areas.
However, breeding stock and replacement quality heifers are in short supply and some producers are easing back into stockers, some of which are coming from Mexico, with imports up over 20 percent from the same period a year ago.
Most cattle marketers expect offerings to become extremely tight through the spring months with most light cattle turned-out and very few yearling feeder cattle left to sell. One of these months, the cattle on feed report will reflect just how short supplies really are—and this could bring a newfound spark to the industry after most of the bulls have left the room. — WLJ