Have cattle and beef markets peaked for the spring?

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Fed cattle and boxed beef prices have behaved very similar to last year so far in 2013.  Choice boxed beef made a dramatic run from the low$180/cwt. range to a peak of $197.49/cwt. on March 13 before falling back under $192/cwt. this past week.  In 2012, Choice boxed beef made the first of three runs at the $200/cwt. mark, peaking at $198.80/cwt. in the first week of March before falling back.  Fed cattle peaked recently at $128.00/cwt, much as they did one year ago in early March at $130.00/cwt.  In contrast, feeder cattle prices have behaved very differently this year compared 2012.  Most feeder prices have fallen since the beginning of the year.  Last year, feeder prices rose to an all-time peak in early March. 

There are several differences between this year and last year that may change how markets evolve over the next few weeks.  First, the latest Cattle on Feed report indicated that feedlot inventories were 93 percent of last year.  Additionally, placements in February were 86 percent of year ago levels, which is very low even when adjusted for one less business day this February compared to last year.  In the last nine months, feedlot placements have been 8.6 percent below the same period one year ago.  Placements for a similar period one year ago were up 2.1 percent from the previous year.  This nine month drop in placements is 1.57 million head less than the same period prior to March 2012.  Feedlot supplies will continue to tighten in the coming months. 

Feedlots have been impacted by recent winter storms and a new storm this past weekend in the central Plains will result in additional disruptions in fed cattle marketings and production losses. Mexican cattle imports are down by one-third so far this year and are expected to continue well below last year’s level.  It is just possible that recent improvement in the drought conditions will lead to some heifer retention which would further squeeze feeder cattle supplies.  At the same time, carcass weights are falling to a modest increase over year ago compared to the large year over year increases in carcass weights seen for more than a year.  These carcass weights combined with anticipated slaughter decreases will lead to sharper beef production decreases for the remainder of the year.  All of these suggest there is continued opportunity in the next few weeks for additional strength in boxed beef and fed cattle prices.  Beef demand is still a concern and failure of boxed beef price to push above $200/cwt. will perpetuate the current limits in fed and feeder cattle markets. 

Feeder cattle markets will take their cue from fed cattle and boxed beef prices but will be influenced by several additional factors as well.  Drought conditions will determine summer grazing demand for stocker cattle.  Feedlot demand for placements will likely increase some as feedlots move past the current storm impacts and realize more and more additional pen space in the coming weeks.  From this point on, the corn market will be anticipating corn production for the coming marketing year.  If current plans for a much larger corn crop are realized, cheaper feed prices will begin to be reflected in feeder cattle prices before long.  Across the board, supply fundamentals will increase price pressure on feeder and fed cattle prices and boxed beef prices.  It all depends on beef demand.


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