Consumers want more high-quality beef

Demand strong for yearlings

Price strength continued to diverge this week between the declining supply of yearling cattle and the blossoming number of un-weaned calves starting to come to town.
Overall, yearling steers and heifers sold steady to $4 per cwt higher, according to the Agricultural Marketing Service (AMS). Calves traded from $3 lower to $4 higher.
“Bawling calves seem to be finding the most variable demand and it’s very dependent on buyer views of how much or little health risk,” say AMS analysts. “Discounts for those calves without shots or legitimate weaning programs are severe.”
Stronger cash prices the previous week helped boost Cattle futures to start this week. Futures softened late in the week, amid overbought conditions, higher Corn futures and wariness over an explosion at a building adjacent to Cargill’s beef packing facility in Dodge City. That facility never shut down completely and is expected to be back up to speed by early in the coming week.
Through the front three contracts, Feeder Cattle closed $1.01 lower week to week on Friday. They were 30 cents lower to 37 cents higher across the rest of the board. Feeder Cattle lost an average of $2.25 in the last two sessions.
Although regional average prices were higher, based on the National Weekly Feeder and Stocker Cattle Summary, Andrew P. Griffith, agricultural economist at the University of Tennessee, expects seasonal price pressure to prevail.
“The market in its entirety is continuing to trudge through soft market prices and seasonally soft demand. The market is unlikely to find significant support until December or after the first of the year,” Griffith says in his weekly market comments.
One potential wild card, according to USDA’s Economic Research Service (ERS), revolves around atypical calf marketing and feedlot placements coming into the fall.
“Warmer than expected weather patterns and improved supplies of forage may have extended cattle grazing periods, slowing the pace of placements in third-quarter 2019,” say ERS analysts in the latest monthly Livestock, Dairy and Poultry Outlook. “However, some of these feeder cattle will likely need to be moved off grass and into the feedlots in fourth-quarter 2019, keeping feeder prices under pressure.”
Based on recent price strength, though, ERS increased the average expected feeder steer price in the fourth quarter by $4 to $137 per cwt. The annual price forecast for feeder steers next year was unchanged at $141. That’s for steers weighing 750-800 pounds, basis Oklahoma City.
“The expectation is for prices next spring and summer to be slightly higher than they were this year,” Griffith says. “If winter and spring temperatures and precipitation are favorable, then calf prices in the spring may be as much as 2-3% higher than in 2019. This would put 550-pound steer prices peaking near $165 per cwt. A similar increase may be expected in the yearling market through the summer of 2020.”
Fed cattle prices mixed to higher
Negotiated cash fed cattle trade through Friday afternoon was shaping up mostly steady to higher, based on USDA reports. Live prices in the Southern Plains were steady to $1 lower at $108 per cwt.
Prices were steady to $1 higher in the North at mostly $110 in the western Corn Belt and at $109-$111 in Nebraska, but too few to trend in the latter region. Dressed sales were $1-$3 higher in Nebraska at $173-$175. They were mostly $1 higher in the western Corn Belt at mostly $173.

Value of carcass quality increasing with supply

Beef consumers continue wanting more beef that grades Choice and higher, and they’re voting with dollars.
“In 2005, we were producing 12 billion pounds of Choice and Prime. This year, we’re going to produce in excess of 18 billion pounds of Choice and Prime,” says Randy Blach, CattleFax CEO. “I believe this is telling you that our industry is making a major change away from being a commodity market to being a product-driven market. We’re not fully branded yet, but we’re making a major structural shift in our industry today and the consumers are responding.”
Blach was speaking at this week’s 16th Annual Holt Cat® Symposium on Excellence in Ranch Management at the King Ranch Institute for Ranch Management in Kingsville, Texas.
Compared to 2005, he says about 6 million more cattle will grade Choice and Prime this year, and about 6 million head fewer will grade Select or lower. Yet, the price spread between Choice and Select continues to widen; about $13 for average this year. It’s lots wider for Prime, of course.
More narrowly, according to David Anderson, Extension livestock economist at Texas A&M University, the Prime boxed beef cutout averaged $279.55 per cwt during the last month, which is a staggering $64.74 more than a year earlier. During the same period, the Choice cutout was $13.28 more at $215.76.
So, the Prime-Choice spread for that period was $63.80 per cwt compared to $12.33 last year. The average Choice-Select spread was $25.76, compared to about $11 last year and for the five-year average.
In the latest issue of In the Cattle Markets, Anderson explains the price spread is being magnified by less year-over-year fed beef production and a decline in carcasses grading Choice and higher.
“Over the last four weeks, total beef production is more than 0.5% below the same period a year ago,” Anderson says. “Over this period, fed steer and heifer slaughter is down 1.7%, while cow slaughter is up 4.2%.
“Digging a little deeper, fed steer slaughter is down 6.5% while fed heifer slaughter is up 6.7%. Dressed weights continue to be down about 2 pounds per head over the last month for steers, heifers, and cows. Combining weekly slaughter and dressed weights leaves fed beef production about 2.2% lower than a year ago, while cow beef is up 3.8%.”
For the last month, Anderson says Prime is running about 1.6% less than same period a year earlier and Choice is about 2.6% less. Approximately 7.7% more carcasses graded Select.
“Combining the percentage of carcasses by grade and pounds of fed steer and heifer beef produced indicates that over the last month, Prime beef production has been almost 4% below a year ago. Choice beef production is almost 5% lower than a year ago, while Select production is about 5% higher,” Anderson says.

CATTLE MARKET WEEKLY by Wes Ishmael

Calf-Feeder Trade

Regional Steer Price Average

North Central

South Central

Southeast

CME Feeder Index

CME Feeder Cattle Futures

CME Live Cattle Futures

CME Corn Futures

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