CATTLE OUTLOOK – Ron Plain and Scott Brown

Ag Economics, MU   March 27, 2015

Retail beef prices were record high for the third consecutive month

during February.  The price of fresh beef in grocery stores averaged

$6.028 per pound.  That was 4.1 cents higher than the month before and

75.7 cents higher than in February 2014.  Choice beef at retail

averaged $6.27 per pound.

Ground beef prices also set a new retail price record at $4.238 per

pound in February.

The 5 area price of slaughter steers averaged $159.90/cwt during

February, down $4.50 from the month before.  Record retail beef prices

and declining fed cattle prices left the wholesale–retail margin at a

record $2.581 per pound in February.   

There were 492 million pounds of beef in cold storage at the end of

February.  That is 20% more than a year ago and the most since April

30, 2013.  A strong dollar and labor problems at west coast docks may

have forced more beef into storage.

This morning the choice boxed beef cutout value was $250.43/cwt, up

$6.05 from the previous Friday and up $14.00 from a year ago.  The

select carcass cutout was $246.62/cwt this morning, up $2.06 from last

week and up $16.14 from a year ago. 

Fed cattle prices were higher this week on light sales volume.

Through Thursday, the 5-area average price for slaughter steers sold

on a live weight basis was $163.98/cwt, up $2.48 from last week’s

average, up $11.72 from a year ago, and the highest for any week since

early January.  The 5 area average dressed price for steers was

$260.00/cwt, up $4.72 for the week and up $16.52 compared to a year

ago.

Cattle slaughter this week totaled 531,000 head, up 2.5% from the week

before, but down 9.7% from the same week last year. Year-to-date

cattle slaughter is down 7.1% and year-to-date beef production is down

5.0% compared to the same period last year.

The average steer dressed weight for the week ending on March 14 was

871 pounds, down 5 pounds from the week before, but up 15 pounds

compared to the same week last year.  Steer weights have been above

year-ago each week since June 14, 2014.

Feeder cattle prices at Oklahoma City were mostly $4 to $8 higher this

week.  Prices for medium and large frame #1 steers by weight group

were: 400-450# $301-$342, 450-500# $291-$324.50, 500-550# $286-$308,

550-600# $245-$289, 600-650# $243-$271, 650-700# $227.50-$248,

700-750# $210-$229.50, 750-800# $207-$221, 800-900# $194-$211.50, and

900-1000#, $179-$203.50/cwt.

The April live cattle futures contract settled at $162.70/cwt today,

up $4.35 for the week.  June fed cattle settled at $152.95/cwt, up

$2.48 from the previous Friday.  August fed cattle gained $1.90 this

week to settle at $150.00/cwt.

The April feeder cattle contract ended the week at $219.40/cwt, up

$3.20 for the week.  May feeders settled at $218.02/cwt which is $2.62

higher than the Friday before. The August contract ended the week at

$219.17/cwt.

Cow Calf Corner

COW/CALF CORNER

The Newsletter

From the Oklahoma Cooperative Extension Service

March 16, 2015

In this Issue:

Beef trade troubles

Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

Beef trade troubles

Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

I dislike the term “perfect storm” because it is too frequently used and too casually applied to many situations.  However, it is an appropriate description of international cattle and beef trade in early 2015.  Several factors joined forces simultaneously to seriously impact beef exports and imports so far this year.  The situation in 2015 is a continuation of trade issues that developed in 2014.  Total beef production decreased nearly 6 percent in 2014 and resulted in dramatic increases in U.S. cattle and beef prices. A rapidly strengthening U.S. dollar in the second half of the year further exaggerated prices both with respect to U.S. exports and imports, making U.S. exports more expensive and imported beef more attractive in the U.S. market.  

Beef exports were mixed to major export destinations in 2014, compared to 2013, with increased exports to South Korea (up 19 percent); Hong Kong (up 16 percent) and Mexico (up 8 percent) offsetting decreased exports to Canada (down 22 percent) and Japan (down 1 percent) and holding total exports to a less than one percent decrease.  Continued growth in beef exports pushed the Hong Kong total, which surpassed South Korea in 2013, past Canada to be the number three U.S. beef export destination behind Japan and Mexico in 2014.   Total 2014 beef imports were up 31 percent, year over year, with increases from all major import sources.  Import increases were led by Australia (up 74 percent); Mexico (up 23 percent); New Zealand (up 14 percent) and Canada (up 12 percent).  The majority of U.S. beef imports are processing beef, largely for ground beef, the demand for which was enhanced in 2014 by a 14 percent drop in U.S. cow slaughter.

The west coast dock slowdown that developed in late 2014 culminated in severe disruptions in meat exports by January of this year.  The combination of adverse economic values and hampered logistics dealt a serious blow to beef exports in January.  Total exports in January were down 19 percent year over year with decreased export quantities to all major beef export destinations including Hong Kong (down 33 percent); South Korea (down 28 percent); Canada (down 24 percent); Japan (down 15 percent) and Mexico (down 11 percent).  The dock dispute has been settled but it will likely take several more weeks for port movement to return to normal.  In the meantime, some beef that would have been exported was diverted back into domestic markets on top of the winter weather impacts that slowed beef movement and demand in the U.S. 

Interestingly, the dock situation seemed to have less impact on beef imports which jumped dramatically in January.  January beef imports were up 64 percent over January, 2013, led by Australia (up 124 percent); New Zealand (up 38 percent); Mexico (up 35 percent) and Canada (up 18 percent).  Beef imports from Uruguay and Nicaragua were also up sharply year over year. Increased beef imports reflect continued strong demand for lean beef, primarily for ground beef.

U.S. cattle imports were up 16 percent in 2014 from one year earlier as U.S. cattle market prices and the strengthening dollar attracted more cattle form Canada and Mexico.  Total feeder cattle imports were up 20 percent year over year, consisting of a13 percent increase in Mexican cattle imports and a 38 percent increase in Canadian feeder cattle.  Canadian slaughter cattle imports were up 7 percent in 2014 compared to year earlier levels.  Recently released Canadian cattle inventories indicate that cattle numbers continue to fall in Canada and that herd rebuilding has not yet begun.  Anticipated increases in heifer retention in both Canada and Mexico may limit cattle exports from both countries to the U.S. in 2015  January cattle imports were down a combined 14 percent year over year with Canadian numbers down 26 percent and imports of Mexican cattle down 3 percent.  Total cattle imports consisted of a combined three percent decrease in feeder cattle imports and a 33 percent decrease in imports of Canadian slaughter cattle.  Despite tight cattle numbers and potential heifer retention, strong U.S. cattle prices and weaker Canadian and Mexican currencies will keep the incentives to export cattle to the U.S. strong.

Improvement in the port situation should improve the flow of beef in the coming weeks.  Moving forward in 2015, it’s not clear whether the dollar will continue strengthening relative to other currencies but U.S. beef and cattle prices will remain high in any event.  The surge in beef imports from Australia has been fueled by drought-forced liquidation and unsustainable levels of Australian beef production.  Continued drought may result in additional Australian cattle liquidation but possibly at a slower pace as cattle inventories decrease.  Drought improvement could lead to sudden decreases in beef exports from the country if rebuilding should begin.  Though some of the factors adversely affecting beef trade may improve, it is likely that U.S. beef exports will continue weak and drop more in 2015 while beef imports will likely remain elevated. 

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