The feeder-cattle market has struggled through the early part of this spring, but several market factors suggest prices should strengthen in coming weeks. Speaking on the K-State Radio Network’s weekly livestock market outlook program this week, Oklahoma State University livestock economist Darrell Peel outlined some of the forces at work.
Over the past few months, Peel says, feedyards have remained “on the sidelines,” and reluctant to replace cattle they market due to high feed prices and negative margins. As of March 1, feedyard inventories were 7 percent below those of a year ago, and placements during February were down 14 percent from those a year earlier – the lowest February placement total in the current series of reports began in 1996. That lack of demand has pressured feeder prices lower.
Last week however, the Grain Stocks report showed U.S corn stocks about 400 million bushels higher than expected. On the same day, the Prospective Plantings report showed farmers expect to plant historically large acreage to corn this spring. Those reports have pressured corn prices lower, and fed-cattle prices gained about $2 per hundredweight last week as supplies of market-ready cattle tightened.
Boxed-beef prices have been trending lower after reaching a peak near $200 per hundredweight in late March. Peel says weather probably has played a role, as continued wintery conditions, particularly in the Northeast, delay the “grilling season” and limit beef demand. Peel expects boxed beef prices to recover and possibly reach another peak within the next 30 days. So far this week, prices have improved somewhat, with Wednesday’s Choice cutout averaging $191.48 per hundredweight, up from $189.05 last Friday.
Peel also notes that carcass weights, which have been running well above those of a year ago, have dropped off recently as the effect of winter weather begins to show in finished cattle. Continued decline in carcass weights, coupled with tight supplies of finished cattle, will mean continued declines in beef production relative to last year.
Heifer retention has not picked up significantly yet as ranchers assess their moisture and forage situations, but if conditions improve this year, more heifers staying in breeding herds this fall would mean even tighter supplies of feeder cattle.
Finally Peel says feeder-cattle imports from Mexico have dropped off considerably in recent months. 2011 and 2012 brought the second- and third-largest numbers of feeder-cattle imports from Mexico, but much of the supply was due to drought-related liquidation in Mexico. Imports began to drop off in late 2012, and so far this year are down 30 percent from a year ago. Peel expects 2013 imports of Mexican feeder cattle to fall below 1 million head compared with about 1.5 million last year, meaning an even tighter supply of cattle available to U.S. feedyards.
Listen to the radio interview on K-State’s AgManager website.