Despite ongoing positive fundamentals—increasing wholesale beef values, higher prices year over year and evidence of regionally snug front-end fed cattle supplies—market tones grew increasingly iffy as the week progressed.

Steer and heifer calves sold steady to $5 per cwt higher, according to the Agricultural Marketing Service (AMS). Feeder steers and heifers sold steady to $5 lower. 

“Buyers were more reserved on feeders headed straight to the feedyard as CME futures markets were volatile all week,” AMS analysts say. “However, demand was good to very good on calves suitable for grazing. In the North Central part of the country, market reporters noted that there were fewer farmer-feeders in the seats as pens have started to thaw out and get greasy, leading to some cattle starting to carry some mud.”

Moreover, the AMS reporter on hand for Wednesday’s sale at Hub City Livestock Auction in Aberdeen, S.D., explained, “The sheer volume of heavier, finishing type cattle moving right now has allowed buyers to be very choosy, whereas the lighter, greener grass-type cattle are becoming more scarce every week and demand for these remains strong.”

Feeder Cattle futures closed an average of $2.51 lower across the front half of the board, week to week on Friday, and then an average of 93¢ lower.

Andrew P. Griffith, agricultural economist at the University of Tennessee, cautions in his weekly market comments that challenging prices may be looming for cow-calf producers. So far this year, he explains, strong fed cattle prices and Feeder Cattle futures helped fuel higher cash prices for calves and feeder cattle.

“The weakness that was present in the market this week could be a factor of both reduced finished cattle prices and reduced pen space at some feedlots,” Griffith says. “If these two factors are the driving force behind the price decline for feeder cattle then the decline may be short lived and prices should be supported moving into the late spring and early summer. However, if the price decline is due to a larger underlying issue such as increased beef production and no further increases in beef demand, then softer prices may persist.”

Currently, the reduced pen space Griffith alludes to has as much to do with drought-decimated wheat pasture shoving cattle into feedlots earlier than normal as it does increasing cattle supplies.

Placements will slacken, eventually

“Larger feedlot placements in recent months represents a change in timing of feedlot production but not a change in the overall supply situation,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his weekly market comments. “In general, while feedlots will not maintain the placement rate of recent months going forward, feeder cattle numbers will be larger in 2018 supporting increased cattle slaughter and beef production.”

Isaac Olvera, livestock and meat market analyst for Informa Economics IEG, points out that heavyweight placements were record large in January, in terms of number of head, according to the recent Cattle on Feed report. As a percentage of total placements, January of this year was the third largest.

“Additional heavyweight cattle (placed on feed weighing more than 800 pounds) are being placed against late spring to early summer marketings, adding additional supplies to an already well-supplied timeframe, and may pressure fed cattle prices from late spring onward,” Olvera says. He adds that higher forecasted feed costs are expected to temper year-over-year placements as the year unwinds, with placements from the late summer to fall running even with to modestly below a year ago.

In the meantime, Stephen Koontz, agricultural economist at Colorado State University, reminds that cattle prices remain higher compared to last year.

“Calf prices have remained close to $200 per cwt, feeder cattle are about $150, fed cattle remain above $125, and boxed beef values are above $200,” Koontz says, in the latest issue of In the Cattle Markets. “These are rather strong prices, given the volume of beef, pork and poultry in the domestic market. The strong domestic demand and strong export volumes that were well-reported through last year appear to be continuing. The other aspect that appears to be maintained is the retailer’s willingness to feature beef, keep posted beef prices somewhat reduced, and live with a smaller margin. All of these factors have kept the quantities moving and the prices strong.”

President Trump’s late-week announcement of intentions to levy tariffs on steel and aluminum could change that picture (see below).

Fed cattle prices lose some ground

Negotiated cash fed cattle trade was generally $1-$2 lower than the previous week at $126-$127 in the Southern Plains and Nebraska. Dressed trade was $1-$2 lower at $203-$204.

“Finished cattle prices generally surge in the spring months as grilling season approaches and the number of cattle coming off feed is seasonally lower. However, the dynamics are slightly different this year,” Griffith says.

Except for 37¢ higher in away Jun, Live Cattle futures closed an average of $1.28 lower week to week on Friday (from 22¢ lower at the back to $2.67 lower in spot Apr).

“Feedyards will need to continue to stay current to keep a significant price drop at bay, which typically happens when the market starts staring at June as the front contract month,” say AMS analysts.

Along the way, surging wholesale beef prices are helping packers widen their margins. Choice boxed beef cutout value was $4.15 higher week to week on Friday at $222.52 per cwt. Select was $1.82 higher at $214.64.

“The wholesale beef market seems to have a hint of spring to it with the surge in beef prices,” Griffith explains. “Most of the support in this week’s price increase comes from the rib primal, which gains interest during grilling season. The spring market could very well be in play as retailers make purchases gearing up for the grilling season. If some of these purchases are in fact grilling season purchases, then retailers and restaurants must think wholesale beef prices could continue moving higher in the next couple of months, which would be the seasonal tendency for rib and loin cuts.”

Olvera notes that the percentage of cattle grading highest for quality continues at record and near-record levels. For the week ending Feb. 16, 34.94% graded in the upper two-thirds of Choice. Cattle grading prime were a record-high 8.12%.