Cattle Outlook: Boxed beef pushes higher

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Pasture conditions were steady this week, with only 17 percent of U.S. pastures rated as poor or very poor. It is noteworthy that overall conditions did not deteriorate through the months of June and July for the first time in 10 years. This continues to allow many producers to limit the number of beef cows sent to market. Beef cow slaughter for the second quarter of 2014 was down more than 21 percent vs. a year ago.

The 2014 calf crop is expected at 33.6 million head according to the semiannual Cattle report recently released by USDA. This is one more indication that the tight supply of calves will continue into next year. Total cattle and calves were numbered at 95 million head as of July 1.

Choice boxed beef cutout values continued to push higher this week, eclipsing last week's record highs. This morning, the boxed beef cutout value for choice carcasses was $263.77/cwt, up $6.47 from last Friday and $76.99 vs. a year ago. The select cutout posted $258.71/cwt on today's morning report, up $4.07 from last week and $77.72 from a year earlier. The choice-select spread widened to $5.06 after narrowing in recent weeks.

Fed cattle prices were little changed this week, despite the higher cutout values. Through Thursday, the 5-area average price for slaughter steers sold on a live weight basis was $162.97/cwt, up $0.11 from last week's average and $43.45 vs. a year ago. The 5 area average dressed price for steers advanced $1.81 for the week to $258.14/cwt, up $67.96 from the same week last year.

The preliminary July steer and heifer to corn feed price ratio came in at 41.1, the highest reading since September 2006 and more than double the average level from 2011-2013. Though there is more to industry profitability than this simple ratio, it does indicate a relationship between cattle and corn prices similar to the 2000-2006 average of 39.4 that had not been attained in any single month since 2006 until last month.

Cattle slaughter totaled 574 thousand head this week. That was up 0.5% from the week before but down 7.7% from the same week last year. Year to date cattle slaughter is trailing the 2013 pace by 6.9%. The average dressed weight for steers slaughtered the week ending July 19 was 869 pounds, up 4 pounds from the week before and 3 pounds heavier than the same week last year.

Feeder cattle prices at this week's Oklahoma City auction were mostly $4 to $10 higher than the week before. This week's prices for medium and large frame #1 steers by weight were: 400-450# $286-$303, 450-500# $266-$276.50, 500-550# $255-$263, 550-600# $230-$262.50, 600-650# $233-$257, 650-700# $219.50-$240.75, 700-750# $224-$233.50, 750-800# $220-$224.50, 800-900# $211-$220, and 900-1000# $200-$201.50/cwt.

Cattle futures were mixed for the week, with feeder contracts generally advancing while the fed cattle declined. The August live cattle futures contract closed at $157.30/cwt today, down $1.80 from last week's close. October fed cattle settled at $156.00/cwt, down $3.80 for the week. The December contract ended the week at $156.42/cwt. February settled at $156.72/cwt.

The August feeder cattle contract gained $2.02 this week to end at $220.27/cwt. September feeders settled at $219.90/cwt today, up $0.65 from the previous Friday.

Source: University of Missouri



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