Markets — May 6, 2016
May 10, 2016
Compared to last week, early week steer and heifer sales were weak to 5.00 lower with mid and late week sales steady to 3.00 higher. Several encouraging signs for the beef market this week changed the outlook to cautiously optimistic and not a moment too soon as the height of seasonal beef demand is right around the corner. Early week auctions were still cynical, reflective of recent losses throughout the beef sector but by midweek several positive signs had crept up to turn the market ever so slightly. The most obvious was the tremendous futures rally that narrowed the gap between futures and cash prices. In recent weeks, Live and Feeder Cattle contracts have been victim of a repetitive cat and mouse game of up and down trade, without being able to gain any significant ground. This week however futures found some firm support and were able to close with fairly significant gains each day. Slaughter volume has been exceptionally high the last two weeks, a result of the packers forward purchasing at discount prices and this week's kill is expected to be enormous too. Carcass weights for the week of April 23 showed an 8 pound decline in steer carcass weights. This is much larger than the 2-4 pound decline seen in the past several week and brings carcass weights more in line with year ago levels. Between large kill numbers and sliding carcass weights feedlots are in fact becoming more current. As feedlots get cleaned up, not many cattle are market-ready which will tighten supplies and force some packer competition in the next couple months. Boxed beef has felt the pressure from large slaughter numbers, trading sharply lower early to midweek, cutting into (enormous) packer margins.