Cattle and beef price margins adjust amid winter weather

by The City Wire staff ( 4 views 

After a wild January ride, cattle and beef markets are settling into somewhat more stable levels moving forward, according to Derrell Peel, livestock marketing specialist with Oklahoma State University.

He notes that the onslaught on winter storms have affected beef consumption and distribution as well as feedlot production.
Through the first six weeks of 2014, beef production is down 8.6% with cattle slaughter down 9%, according to the U.S. Department of Agriculture stats. As a result, Peel said beef margins continue to adjust with relative winners and losers among the various industry sectors. 

“Wholesale boxed beef cutout had the wildest ride with Choice cutout spiking up to $240 per hundredweight, up 20% from the beginning of the year, and retreating to current levels under $208 per hundredweight,” Peel notes.

He said packers benefitted partially from the short-lived price increase because the values represented a limited spot market for wholesale beef and many packers had a significant portion of their beef production forward priced at lower values.

Peel said packer margins continue to be squeezed by higher fed cattle prices and their limited ability to recoup those costs for the processed meat at high spot prices because of forward contract deals. Packer margins have been further squeezed as boxed beef prices have fallen more than fed cattle prices, he said.

The winner in the recent volatile market swing is the fed cattle market as prices have retained more than half of the January gains. Peel reports fed cattle prices of $135 per hundredweight for the first week of January, dropping to levels of $142 after peaking at $150 about three weeks ago. 

He said feedlots are breaking even or doing slightly better at this time. Peel said that could mean they are limiting losses more than gaining profits, but it is still well above earlier expectations for the market at this time.

A series of winter storms continues to pummel the northern half of the country and winter weather impacts on fed cattle performance will continue for some time, Peel said.