While predicting a neutral La Niña/El Niño season, the Climate Prediction Center reported that some models were leaning toward a slight probability for a weak La Niña. Responsibility for the drought in 2011was attributed to a strong La Niña. Thus far in 2013, drought is continuing in most of the Western United States, particularly in the Southwest, while much of the East—including the corn-producing areas of the Midwest—is dealing with too much precipitation, delaying corn plantings. Late freezes have also adversely affected the winter wheat crop in many places. As a result, prospects for the summer grazing season are very mixed across the United States.
Ongoing drought in most of the Western United States and declining cow-calf producers’ profit margins continue to motivate relatively high levels of beef cow slaughter. Through May 25, 2013, second-quarter federally inspected weekly cow slaughter averaged 10 percent larger than for the same period in 2012, with beef cow slaughter up 17 percent and dairy cow slaughter up just over 3 percent. First-half 2013 total commercial cow slaughter is projected to be 3 percent above first-half 2012 slaughter and could be the largest number slaughtered since nearly 3.5 million cows in 1996. This high cow slaughter, combined with high heifer slaughter, implies a further decline in the national aggregate cow inventory and potentially reduced supplies of beef for several years into the future.
Since peaking in January 2013, average monthly prices for various weight categories of feeder cattle have declined 11-12 percent through May, with heavier weight cattle prices declining slightly more than prices for lighter weight cattle, registering 3-4 percent declines from April to May 2013. Year-over-year declines in May feeder cattle prices were about 15 percent, while fed cattle prices have increased almost 4 percent. Seasonal patterns would suggest further declines into summer.
Although old-crop corn and protein meal prices are increasing, with harvested forage prices and feeder cattle prices declining, cattle feeders see hope for positive margins in a decline in projected total feeding costs from recent $135-$140 to around $125-$126-per-hundred pound (cwt) for cattle to be marketed in late summer and fall (High Plains Cattle Feeding Simulator: http://www.ers.usda.gov/data-products/livestock-meat-domestic-data.aspx). Meat packers are reportedly in the black, which may be contributing to the year-over-year increase in projected second-quarter commercial steer and heifer slaughter. Added quantities of trim from the increased steer and heifer slaughter—along with year-over-year higher cow slaughter and reduced demand for ground beef products due to the sluggish start to the summer grilling season—may also be contributing to the increase in cold storage stocks of boneless beef. Retail beef prices continue to face stiff competition from lower priced pork and poultry.
Rachel J. Johnson