Cattle markets have gone a little haywire. The fundamentals of cattle trade have been ignored because a couple of risky banks blew it and sent financial panic through all markets. April live cattle are trading $10 below the current cash market.
Fed cattle trade has been spotty; packers are working hard to break the market by a few dollars. Most live trade for the week ending March 19 was at $164, $2 lower than the week prior. A handful of cattle traded early in the week at $166. Margins on fed cattle are thin to negative, according to the Ag Center’s closeout calculations.
Slaughter is expected at 631,000 head for the week ending March 16; packers are having a difficult time finding enough cattle. Carcass weights are a full 20 pounds lighter than last year—that’s a lot of beef tonnage to take off the market. The Choice cutout has drifted lower to $279.98; average retail prices are currently $7.57, down just a few pennies from last year. This market should be moving higher in April as demand for grilling gets started. Let’s hope those spring rains come but in a timely manner.
Export markets are starting to slow down. Our friends at the Ag Center wrote recently: “Forecasting high prices for beef caused by shortages of cattle is a safe assumption. As consumers look for cheaper alternative proteins, demand may falter. The prop that may hold beef prices up is our exports that continue to be an important source of demand and price.
“The export numbers for 2022 were very supportive for both price and demand, but ended the year weak. January beef sales were weak falling almost one-third below last year. It will be difficult to increase our exports while domestically the supplies of cattle are in decline. Lower exports are expected to continue all year for the simple reason of lower beef production in this country.
“The breakdown by country is important and foretells the future of our export demand. Japan, South Korea and China are the largest trading partners. South Korea sales are off 37% this year with China also being 25% lower. Only Japan has maintained sales volumes—up slightly over last year’s levels.
“The value of the dollar does a lot to support our beef sales. The dollar has fallen from recent highs to a more reasonable level to support exports. Unfortunately, the economic fallout from COVID has not been limited to the U.S. and all economies have suffered and inflationary pressures are felt around the world. Our increasingly hostile relationship with China does not help our beef sales. The Chinese would prefer to trade with Brazil, but the quality of our beef overcomes some of their hesitation.
“As beef production falls during the coming months and years, we need our export market to prop up the loss of demand from domestic consumers who will be hard pressed to afford beef. Holding on to our export partners will go a long way to sustaining the price levels that are necessary to encourage beef producers to quickly rebuild the herd.”
Beef demand is key to maintaining a strong bullish cattle market. Export demand is already fading a bit and domestic demand may start to fade also. It will be interesting how the markets ration supplies going forward.
Right now packers are wanting cattle about as big as they can get them, but feeders have been having trouble maintaining those high weights. We must remember more than 50% of all beef consumed is ground beef.
We have the smallest national cow herd since 1962, when I was just 6 years old. We all remember 2014-16, the last time supplies were this low and the fed market topped out at around $175/cwt and calves were $3, all due to the last major drought.
Currently, the drought report is saying that drought has improved to only 46% of the nation in some point of significant drought, down from 53% last month. We have had a lot of winter this year and snowpack in the mountains is excellent. We’ve also had a lot of wind, which has dried out a lot of ground. Then, in California, they don’t know what to do with all the moisture.
I’ve been praying for rain a long time now and many of you have received the blessing. However, keep praying until we get those April and May showers—there is still a lot of western range that can still use it. Happy Easter. — PETE CROW
