BEEF finally started a seasonal spring strengthening last week — a rally that commonly lasts several weeks but likely will last only several days this year and do nothing for cattle, according to Feedstuffs sources.
This certainly seemed to be the situation setting up late last week.
The Choice cutout increased $4.91 to $205.49/cwt. last Thursday, a new record high and 7.7% more than year ago. The Select cutout increased 39 cents to $191.03/cwt., 2.7% more than year ago.
However, cattle prices actually fell $2.00 to $126.00/cwt. in the lower Plains last Wednesday and in the Southwest last Thursday.
Analysts said the beef rally was in response to demand from retailers for the start of grilling season and the approaching Memorial Day weekend.
However, they advised that $200-plus beef can't hold in the current economy, especially with chicken and pork supplies expanding.
Many people remain cash strapped, and those who aren't remain cost-conscious. Even quick-service restaurants, known for their "dollar" and "value" menus, are struggling to attract customers, as evidenced in first-quarter sales at McDonald's Corp., which reported that comparable-store sales were down everywhere (Feedstuffs, April 29).
"The economy cannot sponsor a beef move over $200," Dennis Smith at Archer Financials said in a morning wire last week.
The cattle futures clearly supported that contention last week.
The beef run has been driven by demand for middle meats as retailers feature steaks for the grill and the approaching holiday weekend, but retailers are likely to quickly return to featuring less-expensive meats after the holiday, sources said.
Accordingly, live cattle futures were discounted to cash cattle last week all the way into next year, with the June and August boards in the $120.50 range. Even feeder futures were closing down last week, despite decreasing grain prices that would normally suggest an increase in feedlots' demand for feeders and just the opposite pricing situation.
The markets show "a profound lack of confidence in the beef market," Steve Meyer and Len Steiner said in an issue of their "Daily Livestock Report" last week.
Beef cow herd
This degree of confidence is apparently dashing expectations that the beef cow herd will stabilize this year, Meyer and Steiner said, noting that while U.S. beef cow slaughter this year is below year ago, it has increased 10.6% in the last two months.
Beef cow slaughter in Oklahoma and Texas, the "big two" cattle states, has increased 12.3% in the last two months.
Coming into this year, analysts believed that beef cow slaughter would decline significantly as record-high beef prices would drive record-high fed cattle prices that would drive record-high feeder cattle prices and pencil up record-high cow/calf producer profitability (Feedstuffs, Feb. 4).
Analysts projected a beef cow herd next Jan. 1 that would be steady with this year's and on Jan. 1, 2015, that would show herd rebuilding.
This is not happening now, Meyer and Steiner said, as predicted prices aren't materializing and as producers from the Plains into the Texas Panhandle have exhausted what were limited forage and hay supplies to begin with.
Getting a grip on the situation is further complicated by the U.S. Department of Agriculture's decision not to publish a midyear cattle inventory report this year as part of its sequestration obligation, Meyer and Steiner said.
The markets, therefore, will need to wait until next January to get the data necessary to respond accurately to the cattle situation, they said.
New 'for dinner'
Coming, hopefully, to the rescue, the Cattlemen's Beef Board has launched a new version of its national promotion "Beef — It's What's for Dinner," complete with a new audience focus and a new spokesperson.
The new campaign will emphasize beef's taste and 10 essential nutrients, will be directed toward "older" Gen-Xers and millennials ages 25-44 and will feature the voice of actor Garrett Hedlund, according to the board's announcement.
The target audience is attracted to good-tasting and nutritious food, and Hedlund, who grew up on his family's cattle farm in Roseau, Minn., represents healthful living and has "a strong, warm voice," the announcement said.
Research has shown that 45% of the audience said they would eat beef more often if they knew more about its nutrients, especially compared with chicken, the announcement said, and the new campaign will provide that information.
Besides radio spots and presence across a broad range of digital platforms, the campaign will feature print advertising in monthly national magazines oriented to food, health and fitness, lifestyle, men's sports and parenting, and each ad will focus on an individual nutrient, the announcement said.
For instance, one ad notes that beef contains iron and calls it "the most lean, delicious and tender iron known to man."
Hedlund, who the board said "is one of Hollywood's most promising new talents," appeared in "Friday Night Lights" and the movies "Troy," "Tron Legacy," "Country Strong" and "On the Road." He replaces Matthew McConaughey as the voice of beef.
The Beef Board manages the national beef checkoff, which collects $1 in all cattle selling transactions to fund beef advertising and promotion, consumer information, industry research and producer education.
The hog markets staged impressive seasonal strength of their own last week, increasing $3.04-4.61 across the Corn Belt to $88.69-90.12/cwt. on a lean carcass basis, prices that were equivalent to a 67-68 live cash hog market, 19.2% higher than year ago and tantalizingly close to breakeven.
Sources attributed prices to packers chasing hogs to fill orders for pork for the Memorial Day weekend.
However, sources also said the hog market's seasonal strength, like in the cattle market, will be short-lived.
Pork prices are not keeping up with hog prices, which means packers are not profitable and won't continue running after hogs, retailers' holiday requirements are about met and exports are a disaster, sources said.
Some cautioned that the cash markets are topping out, as indicated in the futures last week, which closed last Thursday at breakeven levels for June through August and then broke into negative territory into next summer.
As for exports, March pork sales to other countries were down 18.4% from year ago. March sales to China/Hong Kong were down 36% and to Russia were zero as those two destinations have slapped a no-ractopamine requirement on imported pork.
In fact, U.S. pork exports were down in every market except Canada, and sources said the implications are clear: Less U.S. pork in foreign markets means more pork in the domestic market, which means higher per capita supplies in the U.S. and lower pork and hog prices.
The chicken markets remained steady to firm last week as restaurants and retail stores bought product for Mother's Day weekend, one of the biggest holiday occasions of the year for chicken, especially breast meat, sources said.
Chickens were $1.07-1.11 and 98 cents to $1.05/lb. in the eastern and midwestern regions last Thursday, unchanged to up 1 cent from the week before and 24.6% higher than year ago. The Georgia dock continued increasing and was record high at $1.0375/lb.
Breasts were "insane," according to one source, gaining 4-17 cents to $1.17-1.34/b., 25.5% more than year ago. Breast meat increased 11-20 cents to $1.92-2.02/lb., 28.7% more than year ago, and sources predicted that breast meat could hit $2.20 by the Memorial Day weekend.
The egg markets continued a remarkable recovery from a remarkable post-Easter collapse, increasing 14-17 cents last week to $1.18-1.22 and $1.09-1.11/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday, 44.6% more than year ago.
Eggs have now gained 25 cents in two weeks, recovering half of the post-Easter loss.
Sources attributed the strength to fairly good demand from retailers who began lining up eggs for features two weeks ago, when prices were lower, and to "really good" demand from Mexico, which is dealing with an avian influenza outbreak that's apparently spreading faster and over a larger region than expected.
"We really can't fill orders fast enough," one source said.
The turkey markets were unchanged, with packers saying they didn't have much product to sell and buyers saying they had no problems finding product. Hen turkeys were 95 cents to $1.01/lb. last Thursday, and retail-sized toms were 92 cents to $1.01/lb., 0.7% and 11.5% lower than year ago.
Fresh tom breast meat was $1.55/lb., unchanged but 16.2% under year ago.
The dairy markets were caught between good export demand due to decreased milk production worldwide and a heavy spring milk flow in the Midwest and lower-than-expected cream cheese and ice cream production, which have prompted increased butter and cheddar cheese production, sources said.
Accordingly, dairy prices that strengthened substantially in recent weeks were mostly down last week. Butter fell 6.75 cents to $1.6175/lb. last Thursday but still was 24.2% higher than year ago.
Barrels fell 4.75 cents to $1.8575/lb. but blocks increased 2.25 cents to $1.7225/lb., 24.5% and 19.0% more than year ago.