Cattle markets turned positive, with the futures market finally leading the way. Futures traders have been reluctant to chase the cash market but finally gave in and rallied $3-5 on June live cattle, while the cash market traded $2 higher to $136-144 live. The winter high is possibly yet to be made.
Slaughter levels are running at full capacity, and there are those little telltale signs that cattle feeders are more current than most traders realized. Carcass weights are coming down, and Choice and Prime grading is pulling back because there are more calf feds in the mix.
We’ve seen some good moisture around the country, which has put smiles on cattlemen’s faces, along with improving markets. Calf markets have gained between $8-10 over the past few weeks.
Even feeder cattle futures turned stronger and are showing us those $180 fall contracts again, showing us the way to improved returns.I know it’s been hard trying to keep the cow herd together this past year or longer for other parts of the country.
The big summer video sales are getting ready to start, and cattle feeders will be hungry for those heavy fall yearlings. If you have the inventory and the grass, it looks like a sure-shot fall. Maybe even $2.50 calves will come around.
The beef business in the U.S. should be a growth industry, and it will be again if Mother Nature cooperates with us. The current beef demand has been excellent, even with $5 gasoline. Export markets have been up an astonishing 16 percent over year-ago levels and show no signs of slowing down. Things have been quiet on the legislative front in recent weeks, which tells me that politicians are in reelection mode and much of the proposed cattle market legislation will have to wait until after election season.
Cattle markets have normalized the Choice beef cutout, trading around $270, which is about $30 higher than this time last year. Packer margins have come down to a more realistic level of $200 per head. Retailers are enjoying maximum margins on beef sales, and they haven’t done as many middle meat features as they did a year ago when they seemed to rotate between New York strip, ribeyes and T-bone steaks.
I would plan on a good video marketing season; we all know the calf crop will be smaller with all the cull cows that have left the country. The fall delivery calf sales should be robust, especially for the detailed program cattle.
It appears that all of the corn is planted, and farmers found a dry window to get their planting done. Good moisture has moved through much of the Corn Belt. Barring a major weather event from Mother Nature, we should see an improved corn crop. I don’t know if we’ll see corn prices drop below $6. It’s currently costing cattle feeders $1.47 to add a pound to a fed steer, and we all know expensive feed makes for expensive cattle.
Retail beef prices are currently at $7.39/lb. for All Fresh beef; Choice is a bit higher. I’m always amazed that consumers continue to spend this kind of money on our product. Remember, nothing gets back to you unless that consumer makes a beef purchase.
It’s nice to see some folks wanting to invest in improving beef production on a national scale. I’m optimistic about the Sustainable Beef plant a group of cattlemen want to build in North Platte, NE. They are reasonable with a 1,500-head-per-day plant, and they are surrounded with good quality cattle.
There was one proposal announced recently for western South Dakota. Some group wants to lay out $1.1 billion dollars to build a state-of-the-art plant with robotics. They want to process 8,000 head per day, which seems unrealistic—there isn’t that much feedlot capacity in the area to supply a plant of that size, and they are a long way from major markets. I hope they are successful. I hope they are all successful at adding new beef processing infrastructure. Meanwhile, let’s get back to asking Mother Nature for more rain. — PETE CROW
