Beef markets bullish heading into coming holidays

Wednesday, May 24, 2017

Markets have been buoyed by tighter than expected supplies of beef, stronger than expected domestic demand, continued strong beef exports and speculative support in live and feeder cattle futures contracts.

“The bullish psychology of the market has been supported by news that China is going to reopen to U.S. beef,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. “However, it is still not clear what requirements must be met and how much and how fast U.S. beef will flow into China.”

Peel said cattle and beef markets have pushed the spring rally higher and extended it longer than anyone expected.

As of this writing, feeder cattle prices are up 12 to 14 percent since the beginning of the year while fed cattle and Choice boxed beef are up about 23 percent. Select boxed beef is up about 16 percent since January 1. Feeder and fed cattle markets appeared, yet again, to perhaps have peaked seasonally.

“Fed prices pulled back from highs near $145 per hundredweight earlier in May,” Peel said. “However, Choice boxed beef continued to climb finishing at nearly $248 per hundredweight. The Choice-Select spread has widened to more than $22 per hundredweight following an exaggerated seasonal pattern similar to one year ago.”

Most analysts project the May boost of Memorial Day beef buying is likely done and markets may pull back a bit though grilling demand will continue on to Father’s Day in June and Independence Day in July.

Smaller-carcass weights are continuing to help hold beef production increases in check. Beef production is up 4.3 percent so far this year while total cattle slaughter is up over 6 percent for the year to date.

“Steer carcass weights were down 21 pounds from one year ago while heifer carcass weights were down 18 pounds year over year as of the first week in May,” Peel said. “This is partially offset by heavier cow and bull carcass weights at the current time.”

Forage conditions look very good across much of the country, with the exception of some parts of the southeastern United States.

“Although too much of a good thing led to flooding in many regions, springtime rains have pushed back dry and drought conditions that emerged through the first quarter of the year,” Peel said. “Favorable forage supplies and price, combined with attractive feed grain and supplement prices, will help moderate cattle production costs in 2017.”

As a state, Oklahoma ranks third nationally in the production of beef cows and fifth nationally in the production of all cattle and calves, according to USDA National Agricultural Statistics Service data.