First-quarter Predictions
2018 beginning CAB cutout value: A three-year perspective.
January has kicked off with follow-through on late-December recovery of wholesale beef values. Spot market boxed-beef movement by the second week of the year lagged behind 2016, but sales for 22-day and longer delivery dates are respectably ahead of a year ago.
However, cutout prices are weakening into late January and the prior three years saw a noted decline through the middle of February. While fed-cattle numbers are slated to be a bit tighter near term, carcass weights are declining more slowly than typical from their early December highs.
Those did not seem so negative to prices until late December, but we’ve now seen steer weights for the week of Dec. 25 up 2 pounds (lb.) and heifers up 8 lb. compared to 12 months prior. Bear in mind these weights coincide with the early days of snow and extreme cold that continued into January with likely negative impacts to feedlot weight gains yet to be seen. It is with an eye on supply that we consider the very good likelihood of a lower cutout move into late January and early February.
With the negotiated fed-cattle market turning lower the first two weeks of January and the boxed-beef trade slightly improved, packers will probably have expanded margin to work with, and a willingness to resume larger weekly harvest numbers. That should augur buying opportunities in the present and near term, as cattle feeders anticipate a spring rally on their side.
Editor’s Note: Paul Dykstra is a beef cattle specialist with CAB. Read more of Dykstra’s biweekly comments in the CAB Insider at www.cabpartners.com/news/cabinsider/.