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Agricultural News


Derrell Peel Asks: Boxed Beef Leads Prices Higher, But For How Long?

Mon, 06 May 2013 12:11:54 CDT

Derrell Peel Asks:  Boxed Beef Leads Prices Higher, But For How Long?
Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow-Calf Newsletter:


Choice boxed beef reached record levels above $200/cwt. last week, with fed cattle prices not far behind.   The late spring rally comes after boxed beef and fed markets appeared to have topped in March. Extended cold weather, abundant supplies of competing meats, high gas prices and increased payroll taxes have all played a part in limiting beef demand this spring. Several of those factors have now changed somewhat.


The recent rally in Choice boxed beef has no doubt been part of beef buying for the upcoming Memorial Day weekend. Though the weather has moderated somewhat recently, more winter weather occurred as late as last week. The buying now seems to be more in the tone of insisting that the weather will warm up for the first big summer holiday, in the absence of concrete improvement in the weather so far. Beef demand is also getting some help in the form of lower gasoline prices and strength in competing meat prices. Broiler breast meat has made a strong increase leading to the highest prices since 2010. On the pork side, ham prices have recovered dramatically since the Easter lows, although pork loin prices are still weak.


The supply side of the market is also part of the recent rally and will play an even larger role in the coming weeks. Despite year over year increases in steer and heifer slaughter in the last two weeks of data, combined steer and heifer slaughter is down 2.3 percent for the year to date. Total cattle slaughter is down only 1.5 percent so far this year, due mostly to a 1.7 percent increase in cow slaughter. Though feedlot marketings and cattle slaughter increase seasonally in May and June, the increase may be muted as steer and heifer slaughter will continue relatively tight given lower placements in recent months. Cow slaughter is expected to decrease as the unexpected increase in beef cow slaughter the last five weeks will likely decrease sharply in the coming weeks. Carcass weights are up from year ago levels, but only modestly higher compared to last year's strong year over year increases. Total beef production is projected to be down roughly 2.5 percent in the second quarter but is expected to drop sharply by 5 percent in the third quarter and even more in the fourth quarter of the year.   


Both boxed beef and fed cattle prices are expected to decrease seasonally into the summer, but the real question is how much decrease? Reduced cattle slaughter moving into the third quarter will provide supply support. There is reason to expect a smaller fed cattle price decline than would be normally expected this summer. Fed prices may pull back below the $125/cwt. level for summer lows and then rebound back towards the $130/cwt level in the fourth quarter of the year. Beef demand will remain the key. A warm Memorial Day holiday with strong beef sales may do much to spur stronger beef demand through the summer.



   

 

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