Federally inspected (FI) other (primarily beef) cow slaughter was about 6 percent below year-earlier levels for the week ending February 2 through the week ending February 23, compared with dairy cow slaughter that was 4 percent above year-earlier levels. Total FI cow slaughter for the same period—down almost 1 percent, year-over-year—consisted of 46 percent other (beef) cows, down from 49 percent for the same period in 2012. Cull cow prices increased over the past month and are considered likely to continue increasing through at least the second quarter of 2013.

While the recent snows in the Plains States improved prospects for summer pasture and, thus, demand for lightweight feeder cattle, they have not completely alleviated the drought conditions over the Central and Southern Plains. Feeder cattle prices continue to be influenced by both drought concerns and limited supplies of lightweight cattle to meet summer grazing demand. Declining prices for heavy feeder cattle may reflect their dim prospects for near-term cattle feeding profits.

The snowstorms that moved across the Plains States halted cattle movements, which gave a temporary boost to fed cattle prices and wholesale beef cutout values. Fed cattle prices continue to move erratically between $122 and $128 per cwt. While prices appear to be moving higher at the moment, it is not clear how high they will go before the sector responds to the relatively large numbers of cattle on feed for more than 120 days (adjusted for those calf-feds that would normally be on feed more than 120 days) and other factors affecting supplies.

Cattle on feed for more than 120 days (adjusted) are currently at the second highest level since the series began in 1996. This suggests that there are still cattle that should come to market in sufficient numbers to exert downward pressure on fed cattle prices and likely on wholesale cutout values as well.

Cattle feeders have endured negative margins since March 2011 Even futures prices have not offered cattle feeders the possibility of positive margins, which are unlikely with cattle feeding costs in the mid-$130 range that are expected to continue at least until anticipated lower new-crop corn prices begin to mitigate feed costs. Feeder cattle prices are expected to rise and will largely offset expected lower 2013-14 corn prices, which could lead to continued cattle feeding losses into 2014.

Sandwiched between record and near-record fed cattle prices and record retail beef prices tempered by consumer resistance to high prices for beef cuts, meat packers havealso experienced negative profit margins since summer 2012. Blizzard-induced work stoppages and other factors have resulted in reduced or erratic slaughter numbers for several weeks. As a result, cutout values have increased unevenly and are $12 to $14 above a low that was set in mid-February 2013.