CAB Insider: Prime Seasonality
Paul Dykstra, Certified Angus Beef
via Drovers - February 12, 2020
The fed cattle market over the past two weeks has declined $3/cwt. from the January high of $124/cwt. The late January trend for the past two years saw cash fed cattle prices advancing moderately, yet four factors have recently pressured the market.††
First, commodity and equity markets have suffered from concerns over the Coronavirus. The February Live Cattle contract has declined roughly $6/cwt. since January 23rd. The degree to which this has been causative is arguable, but the funds have pulled their money out of Live Cattle futures.††
Second, the pace of the U.S. cattle harvest last month was up significantly over January 2019. On a weekly count, fed cattle were up 7K head and cows/bulls were up 10K head.
Third, January steer carcass weights were 19 lb. heavier and heifer carcasses were 8 lb. heavier than a year ago. Granted, finished weights last January were lower than anticipated, below 2018, due to difficult winter feeding conditions. So far this year, the duo of greater head counts and carcass weights combine to push production to record volume.
Finally, lower boxed beef prices havenít provided any psychological encouragement for cattle feeders to take an especially bullish stance. This, of course, has coupled with the lower trending futures and a positive basis, encouraging selling cattle in a timely fashion.
With all of this said, the fed cattle price has been resilient with what might now be considered a relatively small price decline at the transition into February. Beef demand is good and forward sales of boxed beef for delivery 21 days and longer have been excellent to start the year.
The healthy pace of those out-front sales is largely due to wholesalers and other volume buyers of product seeing their opportunity to book their needs ahead of the spring price advance. The comprehensive cutout is lower than a year ago at this time, a condition that was certainly not the case from July through most of December 2019. One could make a case that beef is priced where it needs to be in order to encourage product movement and remain competitive.
Prime Seasonality ...
Year End Carcass Quality Steady ...††
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