Cattle Outlook: US Packer Margins Squeezed

US - Packer margins were squeezed this past week as fed cattle prices moved higher and cutout value lost ground, write Ron Plain and Scott Brown, Ag Economics, MU.
calendar icon 4 July 2016
clock icon 3 minute read
Ron Plain
Ron Plain

Fed cattle volume was heavy. Through Thursday, the 5-area average price for slaughter steers sold on a live weight basis was $122.48/cwt, up $6.39 from the previous week's average, but down $28.88 from a year ago. The 5-area dressed steer price averaged $195.94/cwt, up $8.17 from the week before, but down $43.94 from a year ago.

On Friday morning the choice boxed beef cutout value was $208.66/cwt, down $5.34 from the previous Friday and down $41.61 from a year ago.

The select carcass cutout on Friday morning was $193.58/cwt, down $4.80 from last week and down $54.84 compared to last year. The choice-select spread, $15.08/cwt on Friday morning, remains high, but is down from record levels earlier in June.

USDA's June acreage report says there were 94.1 million acres of corn planted this year. That is 7 per cent more than last year and the third most corn acres in the last 70 years (after 2012 and 2013). Soybean acres planted total 83.7 million, which is up 1 per cent from last year and a new record.

The June grain stocks report says there were 4.72 billion bushels of corn in storage at the start of June. That is 6 per cent more than a year earlier. Calculated disappearance during March-May was down 200 million bushels from last year. Soybean stocks totalled 981 million bushels, up 30 per cent year-over-year. The futures market's reaction to these numbers was lower corn prices and higher soybean prices.

USDA weekly crop progress report said that 10 per cent of US pastures were in poor or very poor condition as of June 26. That is up 1 point from the week before and from a year ago.

Last week's cattle slaughter totalled 598,000 head, down 2.1 per cent from the previous week, but up 14.6 per cent from a year ago. Independence Day fell during this week last year.

The average steer dressed weight for the week ending on June 18 was 867 pounds, up 3 pounds from the week before, but down 5 pounds from a year ago.

Feeder cattle prices at Oklahoma City last week were $4 to $7 higher than the previous week. Stocker calf prices were lightly tested. Prices for medium and large frame #1 steers by weight group were: 400-450# $161-$174, 450-500# $157-$168, 500-550# $145-$165, 550-600# $139-$162, 600-650# $148-$157, 650-700# $138.50-$155, 700-750# $130-$154.25, 750-800# $134-$147.50, 800-900# $129.50-$145 and 900-1000# $122.50-$139/cwt.

The August live cattle futures contract settled at $112.97/cwt on Friday, up $2.10 for the week. October fed cattle settled at $113.27/cwt, up $2.40 from the previous Friday. The December contract ended the week at $113.77/cwt.

Corn futures were sharply lower again last week, which helped boost feeder cattle futures. August feeder cattle futures ended the week at $142.45/cwt, up $3.00 from a week earlier. October feeder cattle closed the week up $3.75 at $140.55/cwt.

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