Tim Petry
In the Cattle Markets
Cow prices exhibit strong seasonal strength.
Cow prices were higher again the week of April 5-9 and have increased more than normal this year in spite of historically high cow slaughter.
A wide range in cow prices occurs due to differing grades, yields and other market factors (fed white-fat cows vs. thin, low-yielding cows), as well as the geographic region where the cows are sold. However, in general, cow prices have increased more than $10 per hundredweight (cwt.) this year, when a more normal increase would be $5. Prices are currently more than $10 per cwt. higher than last year, and they have been averaging a couple dollars higher than 2008, which was a record-high year.
Higher prices are being supported by strong demand for hamburger and sharply lower imports of manufacturing grade beef. The "cheeseburger price war" among several fast-food chains, which have been promoting low-priced menu items during the economic downturn, helped demand. And, after a harsher-than-normal winter in several regions of the country, consumers have been anxious to begin the grilling season. Higher prices for competing meats, including chicken and pork, have also stimulated demand for hamburger.
Imports of grinding beef have been off almost 25% this year. Beef from the leading importers of Australia, New Zealand and Uruguay are all off by double-digit amounts. Australia's beef industry is in a herd-rebuilding phase after several years of drought. And, ironically, there have even been reports that too much rain in places may have hampered cattle from getting to market. The decline in the U.S. dollar relative to currencies in those countries where we get beef has also made our market less attractive and other markets more lucrative. That is particularly the case for Uruguay.
Fresh, 90% lean wholesale boneless beef prices are about $15 per cwt. higher than last year as retailers compete for product. Furthermore, prices for fresh, 50% lean wholesale beef have also increased as carcass weights of fed steers and heifers have declined. Severe winter weather was a factor in the decline, which has caused less 50% trim to be available.
Cow slaughter in 2010 has been close to last year's elevated level, but almost 20% above the 2004-2008 average. Beef cow slaughter has been almost 8% higher, partially due to an increase in imports of Canadian cows. Dairy cow slaughter declined about 7% from last year when the first of three dairy cow buyout programs was in progress.
Looking ahead, total cow slaughter is usually seasonally low during the summer months. Several factors favor reduced beef cow slaughter, which should be supportive to prices. First, overall grazing conditions in the U.S. for beef cattle are probably the best that they have been for several years. That, coupled with the heavy beef cow culling that has occurred in the last several years, and stronger calf prices point to reduced slaughter levels. Dairy cow slaughter is also typically lower in summer months, but was elevated last year with the buyouts. Dairy prices are still struggling, and although no buyouts have been announced, dairy cow culling could be higher than average.
The bottom line is that prices should remain strong through the summer months until the seasonal fall decline starts in September.
