Cattle and beef markets have pushed the spring rally higher and extended it longer than anyone expected.
Feeder cattle prices are up 12 to 14 percent since the beginning of the year while fed cattle and Choice boxed beef are up about 23 percent. Select boxed beef is up about 16 percent since January 1.
Feeder and fed cattle markets appeared (once again) to perhaps have peaked seasonally this past week. Fed prices pulled back from the previous week’s highs near $145/cwt. However, Choice boxed beef continued to climb finishing the week at nearly $248/cwt. The Choice-Select spread has widened to over $22/cwt. following an exaggerated seasonal pattern similar to one year ago.
The May boost of Memorial Day beef buying is likely done and markets may pull back a bit though grilling demand will continue on to Father’s Day in June and Independence Day in July.
Markets have been buoyed by tighter-than-expected supplies of beef; stronger-than- expected domestic demand; continued strong beef exports; and speculative support in live and feeder cattle futures contracts.
The bullish psychology of the market has been supported by earlier news that China would reopen to U.S. beef and the announcement that an agreement should be in place by July. It is, however, still not clear what requirements must be met and how much and how fast U.S. beef will flow into China.
Smaller carcass weights are continuing to help hold beef production increases in check. Beef production is up 4.3 percent so far this year while total cattle slaughter is up over 6 percent for the year to date. In the most recent week of actual slaughter data, steer carcass weights were down 21 pounds from one year ago while heifer carcass weights were down 18 pounds year over year. This is partially offset by heavier cow and bull carcass weights at the current time.
Forage conditions look very good across much of the country, with the exception of some parts of the Southeast. Although too much of a good thing led to flooding in many regions, recent rains have pushed back dry and drought conditions that emerged through the first quarter of the year. Favorable forage supplies and price, combined with attractive feedgrain and supplement prices, will help moderate cattle production costs in 2017.