Louisiana Cattle Market Update Friday, June 20 th, 2014 Ross Pruitt, Department of Agricultural Economics and Agribusiness LSU AgCenter Tight Supplies, Higher Prices, and the Beginning of Expansion As the middle of the year approaches, Federally Inspected cattle slaughter is down 5.7% year-on-year. Steer and heifer slaughter are down 1.8% and 8.0%, respectively, with beef cow slaughter 13.8% lower year-to-date (YTD). Weekly beef cow slaughter has averaged 20% lower than a year ago since the beginning of April as timely rains have prevented another round of cow liquidation. Although the other main driver of beef production, carcass weights, has been slightly higher, it s not been enough to prevent beef production falling 4.8% YTD. Fewer cows in the slaughter mix have been one of the primary reasons that carcass weights are slightly higher this year. Tighter supplies combined with improved demand have helped Choice wholesale boxed beef values continue to be $30/cwt higher than last year. Much of the continued strength in the Choice cutout comes from the brisket, flank, and short plate. While the middle meat primals of the rib and loin are higher than a year ago, their percentage increases have averaged 10% higher for the year compared to 20% or better for some of the other primals. Some of the strength in these primals is tied to the export market which has remained strong even with the record setting wholesale prices. Through April, U.S. beef exports are approximately 7% higher for the year. Even with Canada importing 25% less year-to-date than a year ago, this has been offset by increased U.S. export shipments to Hong Kong, Mexico, Japan, and South Korea. The increased shipments to Hong Kong suggest that some U.S. beef is making its way into China even though China does not directly accept U.S. beef. It was also announced this week that Hong Kong has removed all restrictions associated with importation of U.S. beef. U.S. year-to-date beef imports are 5.5% higher through April as Australia and Canada have shipped more beef into the U.S. The majority of the Australian shipments are lean cow beef which is offsetting the decline in U.S. cow slaughter from both the beef and dairy sectors with Canadian shipments tending to be grain-fed beef. Combined with the strong wholesale boxed beef values is the strength in the boxed cow cutout value. Although this value has pulled back slightly since the end of March, the underlying strength in the 90% lean ground beef trim market is providing plenty of support. In fact, all of the major categories of fresh ground beef trim have set records this year, including the 50% trim price which has only recently recovered following the lean finely textured beef stories of two years ago. A recent story in the Wall Street Journal suggests this product is slowly making a comeback with higher beef trim prices providing support for the price of 50% trim in the face of overall tight beef supplies. In addition to strong beef prices, the values for steer and cow byproducts are also at record levels. While there is broad support for wholesale prices, additional demand may be needed to push prices higher. With supplies continuing to remain tight, stable demand will limit downside risk to prices moving
lower. Should the weather continue to be favorable in the second half of 2014, herd expansion will continue to be possible and continue to respond to record high prices throughout the sector. June USDA NASS Cattle on Feed Report summary: Pre-Report Estimates 1,000 head % of Prior Year Avg. Range Placed in May 1,912 93.0 92.5 90.0 95.0 Marketed in May 1,865 95.7 95.5 92.0 98.0 On Feed June 1 10,594 98.4 98.5 98.0 99.0 There were no real surprises in this month s USDA NASS Cattle on Feed report as the survey estimates were fairly close to the pre-report expectations. Placement of cattle weighing less than 600 pounds were the only category to show a year-on-year as feedlots in Kansas and Texas accounted for the majority of the increase in this weight category. Those two states were the only states to see year-onyear increases in placements with Mexican cattle feeder imports being 34% higher than a year ago in May. The majority of other states saw at least a 10% drop from placements in May 2014 compared to May 2013. Corn futures were higher on the week due to concern about the rain that much of the U.S. Corn Belt has received over the past week. The rain may result in lower expected corn production this year. Ethanol production has been higher of late providing additional support. USDA will release updated acreage information at the end of the month which will provide an idea if corn plantings were greater than intentions. Live cattle futures were lower on the week as traders positioned themselves ahead of the monthly Cattle on Feed report and weakness in feeder cattle futures during the middle of the week. Choice boxed beef prices did provide support, but not enough to offset weaker Select prices and the weakness from feeder cattle futures. Feeder cattle futures were pressured by traders taking advantage of profit opportunities during the middle of the week. Cash fed cattle trade occurred on Wednesday and Thursday of this week with prices in most regions $2/cwt than last week. Iowa and Nebraska sales were at $148/cwt with all other areas reporting live prices at $150/cwt. Dressed prices were largely $238/cwt with some as low as $234/cwt.
Feeder Steer Prices* $300 $250 $200 $150 $100 $50 $0 400-450 lbs 500-550 lbs 750-800 lbs $265.76 $239.72 $199.61 $250.00 $242.16 $209.27 $240.00 $232.50 $180.50 $/Cwt *Prices are for Medium and Large 1-2 Steers **Mississippi prices are for midpoint of 400-500 and 700-800 steers Source: USDA AMS $110 $100 $90 $80 $70 $60 Breaking Boning Lean This Week $99.00 $101.50 $89.50 Last Week $98.00 $101.50 $89.50 $/Cwt Mississippi Cull Cow Prices This Week Last Week Source: USDA AMS
Table 1. Futures Prices Live Feeder Month Cattle Change* Cattle Change* Corn Change* June $ 147.55-0.05 July 453 1/4 6 1/4 August $ 146.33-0.30 $ 206.88-1.28 September $ 208.18-0.55 448 1/4 5 1/4 October $ 149.15-0.70 $ 208.33-0.48 November $ 207.70-0.45 December $ 150.50-1.25 452 4 1/2 January $ 202.75-0.57 February $ 151.80-1.55 March $ 201.85-1.00 462 1/4 4 April $ 153.20-1.30 $ 202.50-0.82 May $ 202.48-0.53 Source: DTN * Change is from the previous Friday s close
Table 2. State and National Market Information Commodity This Week Last Week Last Year 5 Area Fed Steer Price Live $ 149.48 $ 149.48 $ 120.93 Dressed $ 236.32 $ 236.32 $ 193.50 Oklahoma City Feeder Cattle Prices 5-5.5 cwt Med and Large #1 $ 251.29 $ 241.57 $ 164.58 7.5-8 cwt Med and Large #1 $ 208.22 $ 194.20 $ 136.44 Boxed Beef Cutout Values (weekly average) 600-900 lb Choice cutout $ 238.39 $ 231.80 $ 199.82 600-900 lb Select cutout $ 230.78 $ 222.86 $ 185.04 U.S. Pork Cutout Value $ 125.81 $ 121.96 $ 106.79 Georgia Dock Broilers $ 111.00 $ 110.83 $ 105.39 Georgia B/S Breasts $ 223.00 $ 223.00 $ 217.00 Georgia Leg Quarters $ 55.50 $ 55.50 $ 54.50 Meat production (million lbs) Beef 484.5 477 523.4 Pork 409.3 413.2 404.9 Slaughter (1,000 head) Cattle 613.0 605.0 659.7 Hogs 1,899 1,915 1,978 Broilers/Fryers 159,347 156,011 158,535 Average Dressed Weight Cattle 792 790 795 Hogs 215 216 205 6/13/2014 6/6/2014 6/14/2013 Poultry Placements (in thousands) 1 LA Broiler Egg Sets 3,772 3,802 3,400 US Broiler Egg Sets 203,313 205,625 203,422 LA Broiler Chick Placements 3,398 3,397 3,124 US Broiler Chick Placements 167,330 168,055 168,854 Source: USDA Agricultural Marketing Service, USDA National Agricultural Statistics Service and Livestock Marketing Information Center 1 Note the placements numbers are lagged by one week prior to publishing.