OSU's Derrell Peel Believes Cattle Market May Be at Seasonal PeakMon, 15 Mar 2010 5:45:06 CDT
Cattle and beef markets may be near the seasonal peak that usually occurs at the end of the first quarter. According to Dr. Derrell Peel, OSU Livestock Market Economist, the fact that all cattle and wholesale beef prices have increased seasonally this year is a good sign compared to the counter-seasonal first quarter weakness in cattle and beef prices last year. While it is difficult to credit much of the current strength in cattle and beef prices to economic recovery with any certainty, the fact that markets are behaving seasonally is an indication that the economy is not dragging markets down as it did this time last year.
Choice boxed beef price is currently about ten percent higher than this same time one year ago, while fed and feeder cattle prices are nearly 15 percent higher. Boxed beef and fed cattle prices have no doubt been helped by winter weather that has contributed to lighter carcass weights and reduced beef production. Choice boxed beef price appears to have stalled out this last week, unable to crack the $150/cwt. level but the fact that it is holding steady is a good sign given the weather disruptions in major consumer areas. Seasonal pressure on boxed beef prices will build in the next two to four weeks and boxed beef prices may have peaked unless additional demand support materializes. Fed cattle prices may have peaked a bit early, helped by winter weather, and have limited potential to move slightly higher before facing seasonal pressure as we move through April. Fed prices are higher due to stronger boxed beef and by-products values roughly $3/cwt. higher (live basis) than last year.
Feeder prices appear to be getting support on several fronts. Heavy feeder cattle prices are stronger on limited supplies and better feedlot demand as feedlots see some opportunity to price cattle against strong Live cattle futures. Stocker cattle prices could easily increase a bit more into April as generally good moisture conditions across much of the U.S. is contributing to robust summer grazing demand in several regions of the country.
While feeder, fed and boxed beef prices will all face seasonal price pressure into the summer, the impact may be limited due to limited cattle numbers; continued slow but steady economic recovery; and favorable trade patterns. The greatest threat, especially for feeder cattle, will be evolving corn market conditions. While corn prices have moderated significantly for the time being, concerns are already in place about delayed field work and possible late planting. From this point on the corn market will likely be more volatile as we engage in the annual game of second guessing corn production from now until harvest.
(this analysis of the cattle market offered by Dr. Derrell Peel of OSU from the weekly email Cow-Calf Corner.)
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