The last full week in December live fed steers averaged $130.03 per cwt. Choice wholesale beef cutout value was $198.22 per cwt. Choice beef advanced to $240.05 on Jan. 22, up 21% over that stretch. The bulk of this week's cash fed cattle traded around $150, up about 15%.
Everybody expected cattle complex prices to march record high sometime in 2014. A period of extended cattle production losses, consecutive years of drought and stratospherically high prices for 2012 crops trimmed the U.S. cattle herd to the lowest level in more than 50 years.
Few expected cattle complex prices to zoom this high this early in the year.
Retailers line up promotional advertising anywhere from a month to three months out depending on products to be featured. Advance time needed varies among retailers.
Retailers do not always lock in to buy product needed to meet those features at the time they choose which products to feature. Trade chatter among pork processors at this week's Iowa Pork Congress suggests retailers are facing difficulty finding beef to fill features. Beef packers also appear short bought on cattle and are scrambling to secure product to fill retailer needs.
The real consumer price sticker shock could occur in early February. That could set the tone for beef and cattle markets going forward. Do not expect fed cattle, wholesale beef prices or retail prices to slip back to levels prevailing in 2013 any time soon. So stock up now.
Little relief in USDA Cattle on Feed Report. The Jan. 1 cattle on feed inventory and December placements were both a bit larger than traders expected. December marketings were a tad smaller than traders expected. On the surface, those numbers could all be construed as a bit bearish. However, the deviations from expectations were all less than half of a typical day's slaughter.
Cattle futures could open a tad lower on Monday. However, traders will rapidly digest the report. Then the markets will refocus on the current tight supplies, the recent price surge and how long retailers and consumers will stay willing to buy beef and cattle at current lofty levels.
Looking at the numbers. Cattle and calves on feed for slaughter in feedlots with capacity of 1,000 or more head totaled 10.593 million head on Jan. 1, 2014. The inventory was 5% below Jan. 1, 2013, but about 70,000 head more than traders expected on average.
The inventory included 6.78 million steers and steer calves, down 4% from the previous year. This group accounted for 64% of the total inventory. Heifers and heifer calves accounted for 3.73 million head, down 8% from 2013.
Placements during December totaled 1.681 million, 1% above 2012 and about 50,000 more than traders generally expected. Net placements were 1.60 million head. During December, placements of cattle and calves weighing less than 600 pounds were 485,000, 600 to 699 pounds were 420,000, 700 to 799 pounds were 391,000 and 800 pounds and greater were 385,000.
Fed cattle marketings during December totaled 1.736 million, 1% below 2012 and about 47,000 fewer than traders expected. That suggests feedlots were not pulling cattle ahead due to good prices in December. The price surge that occurred so far in 2014 likely pulled some cattle ahead in January.
Pork and poultry remain relative consumer bargains. The last full week in December the national base weighted average carcass hog price was $79.43 per cwt. At midweek this week the weighted average national base hog price was $77.81.
The week before Christmas the pork cutout value was $88.61 per cwt. At midweek this week the pork cutout stood at $87.09, down almost 2%.
Pork producers are currently cranking out enough hogs to meet retailer and consumer needs. However, hog supplies are poised to begin declining seasonally.
This week's cash hogs have traded about $6 below front-month February futures. That gap must narrow as February futures approach expiration. Seasonally tightening hog supplies will provide a bit of cash hog price lift. Also bear in mind futures are forward looking markets. Futures traders anticipate that when consumers face price sticker shock at the meat counter they'll think twice about buying beef and step toward the pork at the meat counter. Pork demand is certain to rise as consumers back away from beef. Plus hog futures have been anticipating slaughter reductions due to PEDV pig losses, which have yet to be as severe as expected.
Last week's national delivered whole body broiler price was 97.14 cents per pound. That was down 4% from a year ago.
Pork and broiler producers both expect some buying interest to shift from pricy beef to their meat proteins. Rising demand will help lift pork and poultry product prices. Gains may not be rapid. But do not expect to find many bargains at the retail meat case going forward.