News Update
February 13, 2018
Market Update
Despite a greater harvest count the week of Jan. 29-Feb. 2, fed-cattle cash sales echoed the tones of the prior week, still considering the smaller harvest and shorter supply of beef at the packer level. That left fed-cattle prices essentially unchanged on the week at $126 per hundredweight (cwt.) for the spot market trade.
Boxed-beef trade was stronger early in the week on the heels of those smaller supplies, though quickly reestablished. The past two Saturdays show an estimated 47,000 head of federally inspected cattle harvest. Protein buyers continue to approach the market cautiously, its comprehensive cutout value 8% higher than a year ago and weekly sales for quick shipment running behind.
Average carcass cutout values ended a bit higher, despite some weakness later in the week. The price spreads between Certified Angus Beef® (CAB®) brand, Choice and Select were a bit narrower than the week prior with the Choice-Select spread at $5.50 per cwt. The CAB-Choice spread at $9.10 was just slightly smaller than the prior week and within striking distance of a year ago.
CAB subprimals show a $14.50 per cwt. increase for the week on light, bone-in ribeyes, the rib primal grabbing buyer attention in early February after the January price easing.
Read the full CAB Insider article online.
Packer Margins, Weekly Price and Production Summary
Packer margins have come under pressure in recent days, which has in turn negatively impacted the outlook for livestock prices in the short term. Some of what is going on is normal for this time of year. Lent will start on Feb. 14 this year and will end on March 29. While Lent does not affect demand for meat protein as much as in the past, retailers still pay attention to it and, at the margin, we think it affects the amount of featuring around the country. Foodservice business tends to be slow during this time of year, as well, further contributing to the negative demand picture.
Keep in mind that we are talking about seasonal demand at this point. Overall meat-protein demand remains quite good compared to previous years. Income growth, unemployment and housing markets all remain in good shape despite the recent shakeout in the equity markets.
We do not provide an estimate of the net packer margin because we think production costs tend to vary significantly from packer to packer and depend greatly on capacity utilization.
View the full report online at www.dailylivestockreport.com.
Packers Must Maximize for Healthy ’18 market
Relative profitability for the entire beef sector in 2018 will be largely dependent on packers’ ability and desire to maintain near-maximum production at their harvest facilities as the larger head counts enter the supply chain. Labor is a limiting factor at the packing level, and maintaining a complete and capable workforce will be more important again in 2018. That’s as the industry faces expanded fed-cattle numbers in the face of shrunken packing-plant capacity due to plant closures over the past handful of years, in part triggered by the drought-reduced cow herd beginning as far back as 2010 in the South.
Packer profitability was record high in 2017 and almost that good in 2016. This year starts out with packer profits in the black but tightened recently as packers faced higher cattle purchase costs. While all sectors of the beef business were profitable in 2017, it will be important for packers, specifically, to maintain profitability again in 2018, incentivizing maximum production by operating on six-day weeks. Beef cow herd expansion has not been stymied through lack of profitability at this point, but it appears we are edging ever closer to a bottleneck at the packing level.
Continue reading the full CAB® Insider article online.
Budget Proposal Another Blow to Family Farmers
The White House Feb. 12 released its proposed fiscal year (FY) 2019 budget.
Over the next decade, the $4.4 trillion budget would severely cut many programs that family farmers and ranchers and rural Americans rely on, including $48.6 billion from farm bill programs, $3.7 billion from the USDA, $213 billion from the Supplemental Nutrition Program (SNAP), $554 billion from Medicare and $250 billion from Medicaid. These proposed cuts come on the heels of a massive tax cut for corporations and wealthy Americans, as well as the fifth straight year of projected declines in net farm income.
Regarding the proposed budget, National Farmers Union President Roger Johnson said:
“To say that this budget is disappointing is an understatement. This administration has consistently demonstrated a lack of support for the most vulnerable populations, and this plan is just more of the same. It is frankly disgusting that the government has offered corporations and the wealthiest among us a $1.5 trillion gift in the form of tax cuts while proposing deep cuts to programs so important for low- and middle-income Americans.”
View this NFU news release online.
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