Cattle Market Notes: Week Ending Jan 11, 2013


Cash Cattle:

After some slow movement to close out last week, sales were more robust this week. The five-area price was mostly unchanged at $126.37/cwt. In Texas and Oklahoma, Thursday’s trade was at $126/cwt for live cattle. In Kansas trade was at $126/cwt on Thursday and at $125/cwt on Friday. Live and dressed cattle in Nebraske were called at $125/cwt and $201-$203/cwt, respectively on Friday. The Western Cornbelt reported similar prices with live at $125/cwt and dressed at $202-$203/cwt.

Feeder steers were $2-$3/cwt higher than pre-Christmas trade (with 750-800 lb M&L #1 steers at $151.31) in Oklahoma City. Feeder heifers in OKC were steady to $2/cwt higher than two weeks ago (with 750-800 lb M&L #1 heifers at $139.37). Finally, in OKC, steer and heifer calves were $2-$4/cwt higher (with 500-550 lb M&L #1 steers at $179.27). In Mississippi auction markets feeder steers and heifers were $5-$10/cwt above pre-Christmas trade (with 700-800 lb M&L #1-2 steers at $131.50). Cull cows and bulls were called steady compared to two weeks ago.

Futures:

Live cattle futures finished the week lower. Cash prices moved lower and concern of slipping demand both led to the drop. Smaller paychecks are believed to slow traffic in restaurants and possibly limit purchases at the meat case. Feeder cattle took a double shot to the chin with lower live cattle and higher corn doing a number on feeder futures this week.

Corn futures were higher this week. Exports continue to weigh on the market and most likely this will remain to be the case with South American prices at a discount to the U.S. Still, with the decline in prices for the past number of weeks many traders took advantage by short selling the market (selling at the previous higher price and now buying those contracts back). This buying to cover previous sold futures lifted the market early in the week. Friday’s release of the January supply/demand and Grain Stocks report provided a strong bullish tone. Projected ending stocks of corn was cut from 647 million bushels in December’s report to 602 this month. This is largely due to an increase in corn used for feed. For a time it appeared that wheat was replacing corn in livestock diets but this trend has reversed. Offsetting the diminishing supply of corn stocks was a slight increase in U.S. yield, up 1.1 bushels per acre at 123.4, but a reduction in harvested acres, down 300,000 at 87.4 million, limited this. Corn in storage on December 1 was reported at 8.03 billion bushels. This is a 17% drop from inventories on December 1, 2011, so supplies are no doubt tight. While the December 1 inventory number was within the range of expectations it was slightly smaller than the average. Furthermore, the ending stock estimate from the supply/demand report was much lower than expected. As a result prices surged following the report and more could be in store for Monday.

Beef:

Wholesale boxed beef prices were mixed this week as Select gained on Choice and thus narrowed the spread. Choice finished with a weekly average of $193.81/cwt, down $0.51, and Select finished at $183.38, up $1.09. This narrowed the Choice-to-Select spread just a bit from $12.03 last week to $10.43 this week.

Supply and Demand Report for Cattle/Beef:

USDA released their monthly supply/demand report Friday (Jan 11). This marked the first month of the release time change that was heavily debated in the Fall. The report is now being released at noon Eastern Time when markets are open and most liquid. As it relates to cattle and beef markets, annual production of beef is currently estimated at 25.917 billion pounds for 2012, up 45 million pounds from last month but down 278 million from 2011. Beef production projections for 2013 are at 24.805 billion pounds, up 220 million from last month’s projection but down 1.112 billion from the 2012 estimate. So, as can be seen the 2013 supply is expected to be sharply lower. Beef exports for 2012 were raised slightly to 2.484 billion pounds, up 15 million from last month, and unchanged for 2013. If realized, this would put exports for 2012 and 2013 respectively at 9.5% and 9.8% of total production. Consumption per person was reported at 57.4 pounds for 2012, mostly unchanged, and at 55.4 pounds for 2013, up 0.5 pounds. Thus, the expectation that smaller supplies and higher prices will limit per capita consumption in 2013 remains intact.

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