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In The Cattle Markets

29 January 2010

A weekly review of the cattle market by John Michael Riley, Ph.D., Asst. Extension Professor, Department of Agricultural Economics, Mississippi State University and John D. Anderson, Ph.D., Livestock Economist, American Farm Bureau Federation

January Cattle on Feed

Friday’s Cattle on Feed (COF) report didn’t contain any major surprises, but it did confirm expectations of declining production at least through mid-2010. A combination of poor weather and poor projected margins in December did little to generate enthusiasm for placing cattle on feed. Pre-report estimates differed widely on how much placements would be down, but everyone did expect a decline of some magnitude in December placements. In the end, placements were well on the low side of the average pre-report estimate. The COF report also showed that feedlots were pretty aggressive in their marketing of fed cattle in December. Marketings were up 3.5 per cent from the previous year – at the upper end of pre-report expectations. The combined effect of lower placements and higher marketings is, of course, a drawing down of on-feed inventory. The number of cattle on feed was down 2 per cent compared to last year. The table below summarises the COF report and pre-report estimates:

. 1,000 head per cent of Previous year Avg. Pre-Report
Estimate*
Range of
Estimate*
On Feed January 1 11,009 98.0 98.5 97.0 – 99.3
December Placements 1,546 93.9 95.7 85.9 – 99.6
December Marketings 1,742 103.5 102.3 99.2 – 103.5
*Source: Dow-Jones Newswires

USDA also released the monthly Livestock Slaughter report on Friday. Consistent with the aggressive December marketings discussed above, the report notes that December beef production was up 3 per cent over 2008 and marked a new record for December beef production. This increase was largely offset by lower December pork production so that total December red meat production was just less than even with 2008. For the year as a whole, both beef and pork production were down 2 per cent in 2009 compared with 2008. There were also a couple of interesting things to note in Friday’s Cold Storage report. Compared to a year ago, supplies of frozen beef, pork, and poultry look very manageable. Total red meat stocks in storage at the end of December were down 14 per cent from the prior year and down 1 per cent from the prior month. Total poultry supplies were down 24 per cent from a year ago and down 1 per cent from the prior month. Frozen stocks of leg quarters, legs, and thigh meat were the only poultry items to post monthover- month increases: up 8 per cent, 24 per cent, and 20 per cent. It may be hard to draw these supplies down in coming weeks without some help from the Russian market.

The Markets

Fed cattle traded at $86 on Friday in Texas ($0.50 to $1.00 higher) after fairly uneven trading at prices close to steady in other regions on Thursday. Wholesale beef prices were firm through the first part of the week, but slid lower to end the week. The Choice cutout stood at $143.21 on Friday afternoon – off a little more than $3 from its peak on Tuesday. Oklahoma City feeder and stocker prices were up this week: feeder steers and heifers $1 to $2 higher; stocker steers steady to $2 higher; and stocker heifers $1 to $3 higher.

Nearby live cattle futures moved sharply higher early in the week before falling back on Thursday and Friday. February Live Cattle closed at $86.62 on Friday after trading as high as $87.95 on Tuesday. Weaker wholesale beef (and pork) prices along with uncertainty over the week’s cash trade on Thursday and early Friday put pressure on prices. Outside markets also were not helpful toward the end of the week. The Dow-Jones Industrial Average lost a little over 4 per cent of its value last week: the worst week for stocks since last March. After appearing set to bounce off of recent lows, corn futures dropped again on Friday as private acreage estimates called for larger corn acreage in 2010. March corn closed on Friday at $3.64 ¾, the lowest close on that contract since last October. March corn has lost about 60 cents just since the release of the January World Agricultural Supply and Demand Estimates report.

 

Data Source: USDA AMS Market News
Week of
1/22/10
Week of
01/15/10
Week of
01/23/09
5-Area Fed Steer all grades, live weight, $/cwt $85.00 $84.98 $81.91
all grades, dressed weight, $/cwt $138.38 $136.92 $131.80
Boxed Beef Choice Price, 600-900 lb., $/cwt $144.95 $144.91 $150.98
Choice-Select Spread, $/cwt $4.48 $5.26 $6.49
700-800 lb. Feeder Steer Price Montana 3-market average, $/cwt $95.37 $94.09 $95.05
Nebraska 7-market average, $/cwt $100.08 $99.53 $96.52
Oklahoma 8-market average, $/cwt $97.47 $96.36 $94.46
500-600 lb. Feeder Steer Price Montana 3-market average, $/cwt $117.25 $114.98 $110.34
Nebraska 7-market average, $/cwt $118.33 $116.55 $118.15
Oklahoma 8-market average, $/cwt $109.09 $107.76 $106.20
Feed Grains Corn, Omaha, NE, $/bu (Thursday) $3.48 $3.55 $3.73
DDGS Price, Nebraska, $/ton $109.90 $114.20 $144.63
WDGS Price, Nebraska, $/ton $42.70 $43.00 $45.09

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