The decline in boxed beef values last week put cattle feeders and futures markets on the defensive and was expected to push fed cattle prices at least $1-2 lower. Trade was slow getting started in cattle feeding country as a result of the standoff, with scattered trade reported at mid-day last Thursday at $88 live in the south, down $2, and at $140 dressed basis in the north, down $3-5 from the previous week. Prior week live sales were at $89.50-90.50 with dressed sales trading in a range of $144-145.

Slaughter volume continues to run strong at 487,000 head for the week through last Thursday compared to 503,000 the prior week and 478,000 for the same period a year earlier. Combined with the heavy carcasses currently being produced, there is an excess supply of beef on the market to compete with an excess supply of pork and poultry which has a competitive advantage in the market given its lower wholesale and retail pricing on beef for up-front delivery. For the week ending March 22, beef production was running 5 million pounds ahead of the prior week and 16.4 million pounds ahead of the same week a year earlier as a result of the higher carcass weights and the year-over-year increase in harvest.

In addition to the excess production, which will work in the market’s favor by keeping marketings current going into grilling season, there is also an ample supply of Prime and Choice product being produced. In fact, for the week ending March 22, Prime and Choice grading percentages at 2.78 percent and 57.81 percent respectively are well ahead of last year’s production and exceeding market demand by a good margin. The excess production of high quality product is partially responsible for the depressed cutout values, although a lack of consumer discretionary income is the primary factor. Slaughter volume for the week through last Thursday was quite robust and packers were having difficulty moving product out of cold storage without deep discounts. Thursday’s Choice product price dropped 80 cents in morning trade to $139.97 while Select slid two cents to $139.41.

The consumer is being pinched by rising energy prices and a wave of bad news coming from the financial markets has seriously eroded consumer confidence. That erosion has led to cutbacks in discretionary spending which has even hit the ground beef market, causing some weakness in cow beef which, until recently, has been one of the few bright spots in beef trade. The weaker dollar has added costs to the import of grass fed lean beef from other countries adding to consumer prices and causing them to back away from the table slightly. The result has been a slide in cow beef prices from two weeks earlier to $114.66 although it remains more than $10 above year ago levels, mostly as a result of few cows heading to slaughter. The fresh 90 percent lean at $140.43 and the 50 percent trim at $58.96 are also lower than the previous week but higher than year ago prices of $125.28 and $56.07 respectively.

On the Chicago Mercantile Exchange last week, the lack of positive news in the cash markets, coupled with volatility in the grain markets, pressured fed and feeder cattle prices. Lackluster beef movement at the retail level is being closely scrutinized by fund traders and they’re using it as justification for pressuring contract prices lower in the absence of any positive news from the cash trade. At the closing bell last Thursday, live cattle futures were lower across the board, with up-front contracts bearing the biggest losses. April contracts were down $1.52 to $88.62 while June declined 145 points, ending at $88.60. August live cattle lost 75 points, closing at $93.45, and October declined 65 points to finish the day at $99.37.

Feeder cattle

With the largest spring runs of Midwest feeder cattle already past, markets around the country saw mostly upside last week as the prices regained ground which was previously lost to the seasonally-high supply. Most classes of feeders dropped during the month of March as buyers were able to select heavily for quality cattle ready to be put on feed or grass.

Prices paid for bunk-ready feeder cattle are likely to remain high for as long as buyers perceive a lack of feeders moving into the summer months, and feed yards seem sure to focus on keeping pens full even in light of high-priced corn.

“The feeder cattle trade reminds me of that pink Energizer rabbit that keeps going on and on, beating his drum, regardless of the obvious obstacles,” said Walt Hackney, DTN analyst. “Corn markets continue to build a wall of indecision within the ranks of the cattle feeders. But it seems that for every Midwest corn farmer/cattle feeder that chooses selling out his inventory of corn to the $5-plus cash trade... there is a corporate and/or a commercial feedlot that is intent on filling pens in order to be prepared for a suspected shortage of packer-ready cattle down the road.”

The situation is the same around the rest of the country as it is in the core cattle feeding areas of the high Plains, despite corn and fuel prices which make it difficult to justify shipping and feeding cattle. While the Plains thaw out and the grass begins to green, ranchers in portions of the far west are hurting for rain.

Jake Parnell, manager of Cattlemen’s Livestock Market in Galt, CA, said that after getting off to a good start with plenty of moisture early in the year, his area will need some rain if producers plan to have good grass as the spring progresses.

“We could definitely use a rain. The snow was great and filled all the ponds and gave us good moisture going into spring, but we haven’t had a drop in the month of March,” said Parnell. “The grass is at a stage now where it’s got some good oomph behind it, and just a little bit of moisture would really make it spring up, but we need something pretty soon.”

Parnell said that with the lack of moisture, it’s likely the spring run of feeder cattle in his area could begin earlier than normal.

“Generally, we would expect to see the larger runs coming in sometime in mid-April, but if we don’t get some rain in the next five to 10 days, I’d say we’ll probably start seeing a lot of lighter weight calves soon,” explained Parnell, who noted that prices are still good due to a short supply. “I don’t think the lighter weight feeder cattle will be hit too hard if we continue to dry up, because they seem to stay pretty steady at about $1.20 for five-weights. The heavier yearlings should still bring good prices as well, because there just aren’t many of them around right now.”

At the Oklahoma National Stockyards in Oklahoma City, OK, a total of 6,318 head were available at last week’s sale. Steers over 600 lbs. were steady to $2 higher, with those under 600 lbs. going $2-4 higher. Feeder heifers and heifer calves were steady to $2 higher, with weights over 800 lbs. lightly tested with a lower undertone noted. Demand was good for grazing cattle and moderate for other classes. Receipts were somewhat lighter due to the Easter weekend, though the numbers of cattle which have yet to come to market were reportedly in light supply. Steers weighing 671 lbs. sold for an average of $108.92 at this sale, while heifers weighing the same sold for $95.93.

There were a total of 4,500 head received last week at the Joplin Regional Stockyards near Joplin, MO, where steers under 650 lbs. went $2-4 higher. Heifers under 650 lbs. were $1-3 higher, the exception being 450-600 lb. fleshy, new crop steer calves, which were steady. Steers over 650 lbs. were steady to $2 higher, with heifers over 650 lbs. steady. Demand and supply was moderate. The calf offering included both thin, weaned and fleshy, un-weaned calves. Yearlings were mostly in medium to fleshy condition. Feeder steers weighing an average of 679 lbs. sold for $103.58, while heifers weighing 657 lbs. followed at $93.35.

Last week’s Winter Livestock Feeder Cattle Auction in Dodge City, KS, saw a total of 4,065 marketed, where steers weighing 350-600 lbs. were $2-4 higher. Weights of 600-700 lbs. were steady to $1 higher, with 700-850 lb. steers going $1-2 higher. Heifers weighing 450-600 lbs. sold $1-3 higher, with weights 650-750 $1-3 lower. Steers weighing an average of 717 lbs. sold for $102.84, while heifers weighing 658 lbs. sold for $92.93.