Cattle trapped

Cattle trapped

- Feedlots place more and heavier feeders than expected. - Hog slaughter and pork production expected to rise for rest of year. - Chic

IF the feedlot inventory report issued June 21 wasn't bearish, it surely wasn't bullish.

It continued its recent string of placements that were larger than expected and skewed to the heaviest category of cattle weights as well as its recent string of less-than-expected marketings (Table), according to Feedstuffs sources. The actual inventory has declined just half of the normal Jan. 1 to June 1 decrease, sources added.

The report "left a bearish cloud hanging over the markets," Bob Price at North America Risk Management Services Inc. said in an analysis.

Recent trends mean that there will be more cattle and heavier cattle to be marketed this fall "than we've seen in several years," which will keep cash cattle prices under pressure, Price said. Futures will need to find something on which to rally to lead cash higher, he said.

Derrell S. Peel, an extension livestock marketing specialist at Oklahoma State University, cautioned that cattle feeders are getting caught in a trap.

Feeder markets are focused on very high corn costs, which is a negative to feeder prices, while feedlots are focused on expected lower feed costs later this summer and fall and have been buying feeders while they're cheap, he said.

However, this has decreased feeder supplies, which has increased feeder prices, Peel said, and higher feeder prices will encourage cow/calf producers to hold back heifers this fall to at least stabilize their herds, a process that will limit feeder supplies and strengthen feeder prices even more.

So, the lower feed costs on which feedlots are focused probably will be entirely offset by higher feeder prices, and excruciating feedlot losses will continue, Peel said.

 

Feedlot inventory report, June 1

 

2011

2012

2013

2013 as

Category

-Million head-

% 2012

May 1 inventory

11.175

11.110

10.735

96.6

May marketings

2.002

2.017

1.948

96.6

May placements

1.810

2.084

2.049

98.3

June 1 inventory

10.902

11.077

10.736

96.9

120-day-plus inventory

3.981

4.306

3.861

89.7

Source: National Agricultural Statistics Service.

 

Market roundup

The cattle markets did not trade in sufficient volume through Thursday last week to establish prices and, at week-before levels, were $120.50-121.50/cwt. on the northern Plains and $120.00 on the southern Plains, 3.6% higher than at this time last year.

Beef continued to see price resistance, with the Choice cutout declining $1.98 to $197.38/cwt., down about $12 from its record high in mid-May but 0.6% higher than year ago.

With beef buying done for the Fourth of July weekend, it's likely that there will be little to hold the cutout for the next six weeks or so, sources said, and as beef demand this summer will be critical to cattle prices, it's also likely that there will be little to support the cattle markets.

The hog markets also continued to retreat from record-high prices in early June and were down 49-54 cents to $98.24-99.86/cwt. on a lean carcass basis last Thursday, equivalent to a $74-75 live cash hog market and 1.1% higher than year ago.

Prices were profitable, and futures closed last Thursday at levels that would suggest that prices will remain in the black for July and August.

Hog and pork supplies are beginning to increase and ease recent tightness, which points to flat to lower hog and product prices, sources said. Indeed, pre-report estimates for the June 1 hogs and pigs report scheduled to be issued last Friday indicated larger hog slaughter for the rest of the year, and bellies and the full pork cutout, which had both established record highs last Wednesday, collapsed on Thursday.

If pork has topped, cash hogs and futures can be expected "to buckle," Dennis Smith at Archer Financial Service said in an afternoon wire.

The chicken markets were lower and quiet despite first-of-the-month and holiday opportunities this week. Sources said price have been and remain so high that the chicken complex "is just not workable" for restaurant operators and retailers.

Chickens were down 1-3 cents to $1.05-1.09/lb. in the eastern and midwestern regions last Thursday but still were 29.7% higher than year ago.

Breasts were down 1-5 cents to $1.16-1.26/lb., and breast meat was unchanged to down 12 cents to $1.65-1.71/lb., breasts 19.2% and breast meat 30.2% more than year ago.

The egg markets picked up another 9-11 cents and were up almost 20 cents from their bottom early last month to $1.12-1.16 and $1.06-1.08/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday. Prices were 8.6% more than year ago.

Producers are culling or molting flocks, which made supply and demand more balanced, sources said, and Mexico has returned to the U.S. market to replace domestic production lost to avian influenza.

Markets are expected to hold steady this week but then could lose ground again starting next week as eggs enter the lowest demand period of the year, sources said.

The turkey markets were unchanged, with a national offer last Thursday of 96 cents to $1.01/lb. for hens and 92 cents to $1.01/lb. for retail-sized toms, 7.5% and 11.4% lower than year ago.

Sources said hen supplies are in fair shape, but toms are available and holding back the whole-bird situation.

Fresh tom breast meat was unchanged at $1.62/lb., 7.0% lower than year ago, but prices were catching up to year-ago levels as decent weather on both coasts has increased demand for cooked and deli meats, sources said.

The dairy markets continued falling, but sources continued to insist that global supplies are tight and that export demand for more competitively priced U.S. dairy products will pick up soon and rally prices.

Butter dropped 8 cents to $1.4275/lb. last Thursday, 6.1% lower than year ago; barrel cheese fell 12.5 cents to $1.5975/lb., 4.6% under year ago, and block cheese fell 8.75 cents to $1.6375/lb., 0.9% under year ago.

Volume:85 Issue:26

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