Tumbling wholesale beef values pressured cattle markets this week. On the one hand, declining wholesale beef values point to tougher sledding with consumers, especially as more volume enters the market. On the other hand, spot Live Cattle futures continue to offer cash support to fed cattle.
Although demand for calves and feeders should soften as orders are filled, AMS analysts note, “Many market watchers feel there is still some fuel left in these rockets with available supplies of feeders seasonally tightening and ample on-farm feed storage.”
“In the U.S., we see the outbreak of PEDv causing a significant shortfall in the availability of market hogs in 2014 – to the tune of 12.5 million hogs or 11% of annual slaughter,” says William Sawyer, a Rabobank analyst.
"If herd expansion plans move forward on adequate or better forage conditions, cull cow prices will likely stay above $90/cwt. for the remainder of the year and average in the mid $90s or higher,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.
“Many backgrounders are facing the realization that they are going to run out of money before their pastures are filled, with stocker cattle prices roughly 25% higher than last year,” AMS analysts say. “Cattle growers may be afforded a rare opportunity to lease pastures in the major grazing areas (like the Flint Hills of Kansas) as grazers start to scale back the number of head they turn out, either due to a lack of capital or a lack of nerve.”
“Some cow-calf operations will see 2014 as the golden opportunity to get out with record-high cow prices,” says Chris Hurt, Extension agricultural economist at Purdue University. “But the greater tendency will be for producers to hold on to the cows for the profitable opportunities that are expected over the next three or more years.”
“Live-cattle futures have jumped 10.2% so far this year, a gain that is leading to higher wholesale beef prices and is widely expected to result in record U.S. consumer prices for steaks, ground beef and other products this year,” says John Otte, Penton market analyst.