Agricultural News
OSU Economist Derrell Peel Talks Seasonal Strength in Cattle and Beef Markets
Mon, 20 Mar 2017 20:48:15 CDT
Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel discusses the seasonal strength he is seeing in the beef and cattle markets.
"Fed cattle and boxed beef markets have rallied nicely the past month. After a strong January, fed cattle prices dropped below $120/cwt. in February before the recent rally. Mid-March live fed cattle prices pushed up to $128/cwt. with some trades over $130/cwt. reported. Choice boxed beef has increased from a February low below $188/cwt. to a recent high over $223/cwt. There is no clear indication that the rally is over but a top or at least a plateau in these markets is likely soon before markets move seasonally lower in the second quarter.
"The rally has been all the more impressive given that we are in a growing supply situation. Cattle slaughter is up over 4.5 percent year over year with beef production up 3.7 percent for the year to date. The latest carcass weights for steers are down 12 pounds from the same date last year with heifer carcasses down 13 pounds from one year ago. Despite growing feedlot placements in recent months, aggressive feedlot marketings have kept feedlots current with beef moving crisply through market pipelines.
"It is possible that the current market strength is more than just a seasonal first quarter price rally. Domestic beef demand appears to be continuing stronger though March data are not yet available. However, February retail beef prices were stronger with both retail Choice and all fresh beef prices higher. The ratio of retail all fresh beef price to poultry price increased in February despite a slight increase in poultry prices as well. Retail pork prices were also higher in February. The latest trade data from January showed that beef exports were up 20.9 percent and beef imports were down 24.7 percent. It appears that both domestic demand and international trade has continued to support beef wholesale markets through the first quarter.
"Feeder cattle markets have held mostly steady since January though stocker margins have adjusted down with slight increases in calf prices combined with slight decreases in heavy feeder prices. Continued stocker demand for wheat grazeout will soon be replaced with summer grazing demand. However, emerging drought conditions in the middle of the country and reemerging drought in the southeast are a potential concern that must be monitored closely in the next 30-60 days. Cull cow prices have increased seasonally this winter. March cull cow prices in Oklahoma are up nearly 20 percent from November prices, consistent with typical seasonal increases from the fall lows.
"I've had a number of questions about the impact of the fires in the Southern Plains. Though animal losses are still being determined, the numbers of cows, calves and other animals lost in the fires will not likely have any noticeable impact on market prices. That said, I drove through part of the burned area last week and the impact to the families and operations directly involved is tremendous. The loss of animals, fence, pasture and hay is a devastating burden on ranches; all of which pales in comparison to the loss of human life. As long as drought conditions do not persist or expand, the country should recover rather quickly this spring. Having lived close to this area in the past I know that the people are hardy and resilient folks that will recover as well but the emotional and economic healing will take more time."
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