Although cattle futures, calf and feeder prices and fed cattle prices were higher, weakness in wholesale beef value continues casting a shadow over the market.
Cattle markets finally roared back to life this past week, fueled fundamentally by fewer placements and cattle on feed than folks expected in the previous week’s monthly Cattle on Feed report.
For perspective, December placements of 1.66 million head were 1% less than a year earlier. Pre-release estimates averaged an increase of 4%. Cattle and calves on feed for slaughter (11.2 million head) Jan. 1 are 6% less than a year ago. The average pre-release estimate was for a decline of 4.4%. December marketings of 1.75 million head were 1% less. Estimates heading into the report called for an average decline of almost 7%.
Futures markets enjoyed an added emotional charge with Monday’s announcement that Feb. 1 Japan will begin accepting U.S. beef exports from cattle 30 months and younger. Japan has limited U.S. imports to beef from cattle 20 months old and younger since 2006 when it resumed importing some beef from the U.S.
A Closer Look: Japan Opens Door To More U.S. Beef
Feeder cattle traded $3-$6/cwt. higher last week, according to the Ag Marketing Service (AMS). Calves weighing more than 550 lbs. sold firm to $5/cwt. higher, while lighter-weight calves and true stocker calves in thin-fleshed and hard-weaned condition brought $5-$15/cwt. more.
“The largest contributor to the current increase in feeder cattle demand is the fact that availability is drying up just as fast or maybe even faster than most folks thought it would,” AMS analysts explained Friday.
“Auction receipts continue to plummet and are running 20% lighter than last year. The push is already becoming frantic for grass cattle, and the most activity is being seen on lightweights under 450 lbs., but heavier stocker cattle are also seeing a boost.”
Friday’s USDA Cattle Inventory report underscored how much tighter cattle supplies are becoming.
“If moisture levels allow for the additional keeping of heifers, this will only exacerbate the limited availability of feeder cattle,” AMS analysts note.
Despite the positive vibe, including higher cash fed cattle prices—generally $3/cwt. higher than the previous week at $125/cwt.—cattle futures closed the week on a sour note as boxed beef cutout values continued losing traction. Choice ($182.56/cwt.) was $2.76/cwt., down $4.20/cwt. in two days. Select ($178.62/cwt.) was $1.63/cwt. lower; $2.40 lower in the last two sessions.
A week earlier, AMS analysts explained, “The loss of market position on the CME Live Cattle contracts and seemingly unreachable breakevens have taken many feeder cattle buyers out of the market but the expected destiny with unprecedented tight supplies has many doing what they do best; betting on the come.”
“Steer calf prices ended 2012 near the previous year’s record levels. However, prices likely will not be as high as last year early in 2013 due to the drought that continues to plague much of the country,” explains Tim Petry, North Dakota State University extension livestock marketing economist, in his Spotlight on Economics. “Should the drought subside, and spring and early summer grazing conditions improve significantly, calf prices could challenge last year’s levels by April or May…Both calf and feeder cattle prices are expected to be volatile in 2013 because of the expectation of continued volatility in corn prices.”