Precipitation in the Southern Plains over the last couple of weeks could lead to reduced cow slaughter for the remainder of the second quarter and beyond if there is sufficient follow-up precipitation. However, as welcome as was the precipitation, it was well short of that needed to break the drought in the Southern Plains, Southwest, and West. Increased precipitation could also motivate support for prices already at record levels for all weights of feeder cattle and cows.

Despite what appear to be weakening corn prices and still-positive feeding margins, cattle feeders are caught between steady-to-stronger feeder cattle prices already at record levels and fed cattle prices that are moving erratically higher at a slower pace than feeder cattle prices are increasing. Steer and heifer slaughter is currently below previous expectations for this point in time, but could increase into summer as the year-over-year larger numbers of cattle placed on feed during the 4th quarter 2013 begin to reach market finish. Based on recent and current feeder cattle and corn prices and even with the recent jump in fed cattle prices, red ink could reappear for cattle feeders later this summer.

On the other hand, packers appear to be back with positive margins despite stalling cutout values. Average monthly retail Choice beef prices for April jumped more than 2.5 percent to a new record from March and were up a whopping 12 percent over the April 2013 average. The average price for May 2014 was $5.91, up from April’s price—a new record—and 13 percent above the May-2013 average price.

Despite the record price levels, lackluster demand for middle meats is exerting some downward pressure on retail prices and wholesale cutout values. 

See full USDA report here