As if $5 corn were not enough, concerns over the economy as a whole appear to be pressuring beef prices and adding to hard times in the cattle-feeding sector.
Wholesale beef prices lost ground from mid-February through late-March, dropping from over $150 per hundredweight to around $140. The figures suggest declining consumer confidence could be af-fecting beef demand, although large supplies of competing meats have also contributed to the weak market.
During the same period, the Choice/Select spread, normally about $10 to $12 per hundredweight at that time of year, declined to about $1. Part of the reason is that grading percentages are up this spring. USDA reported that for the first week of March, 58.3 percent of carcasses graded Choice — up 4 percent from one year earlier and nearly 3 percent above the five-year aver-age. The figures also suggest lighter demand for Choice beef, particularly in restaurant trade, as con-sumers economize by dining out less.
Provided the economic news doesn’t become too negative, consumer demand for beef in general, and particularly for Choice middle meats, should improve as the grilling season approaches.
In other, more positive news, U.S. beef exports continue to recover. University of Nebraska econo-mist Darrell R. Mark, PhD, notes that January exports totaled 119 million pounds, up 771,000 pounds from December and an increase of 35 percent over the total for January 2007. Weakness of the U.S. dollar relative to other currencies, he adds, makes our beef more affordable in the international mar-ket, while also contributing to a reduction in beef imports. During January of this year, beef imports were down 20 percent compared to January 2007. Canada and Mexico account for most of our beef exports. Critical markets in Japan and South Korea, while improving, still lag far behind pre-2003 lev-els.
Growth in exports helps support cattle prices, particularly as international demand boosts the value of beef byproducts. Hide and offal values topped $10 per hundredweight during January and aver-aged $10.72 during February, according to the Livestock Marketing Information Center. For the first two months of this year, byproduct values were up nearly 8 percent from the same period last year.
The March Cattle on Feed report showed March 1 feedyard inventories at 2 percent above March 1, 2007. Placements into feedlots during February totaled 1.72 million, 4 percent above 2007 and 9 percent above 2006. In spite of the high cost of gain in feedyards, placements were up in every weight category except 800 pounds or more, reflecting a shortage of winter-grazing opportunities. Feedyards marketed more cattle than they placed during February, moving a total of 1.78 million head, which was 4 percent above 2007 and 11 percent above 2006.
Supplies of market-ready cattle will remain high enough to prevent any large price rally this spring, but prices should improve through the second half of the year as supplies drop off.