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Got charcoal? Beef numbers ensure a full grill

Progressive Cattleman Editor Dave Natzke Published on 23 May 2016

Cattle on feed, beef production and beef cow slaughter were all higher in April. Cash prices provided a Memorial Day-demand bump, helping early May margins a little.

Early May margins improved, but still negative

Beef margins strengthened since the end of April, as higher cattle prices more than offset the impact of increased feed costs, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC. Despite the improvement, finishing margins remain deeply negative in nearby marketing periods for cattle already on feed, as well as below breakeven for deferred margins against future placements.

Cattle prices did receive support from the cash market, as demand to fill beef orders ahead of the Memorial Day holiday appeared to drive increased packer interest. Fed cattle prices increased $6 in the Texas Panhandle for the week ending May 13, to go along with a $7 gain in Nebraska and a $5 rise in Colorado. While concern remains over how beef demand will fare against pork and chicken after Memorial Day, current demand trends are promising.

USDA’s May World Ag Supply and Demand Estimates report provided the first balance sheet for the upcoming 2016-2017 crop year. New-crop corn ending stocks were projected at 2.153 billion bushels, up 350 million from the current year’s projection, but within the range of market expectations. South American corn production was lowered in South America. Corn prices have been rising mostly in sympathy with soybeans, while some traders also expect a slight shift of final acreage out of corn into soybeans.

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Cattle on feed up 1 percent

Cattle and calves on feed in U.S. feedlots with capacity of 1,000 or more head totaled 10.8 million head on May 1, up about 1 percent compared to a year earlier.

At 7.1 million head, Kansas, Nebraska and Texas feedlots held nearly 66 percent of the U.S. total.

April placements totaled 1.66 million head (1.59 million net), up 7 percent from a year earlier. Placements of cattle and calves weighing less than 600 pounds were 334,000 head; 600-699 pounds were 225,000 head; 700-799 pounds were 390,000 head and 800 pounds and greater were 715,000 head.

April fed cattle marketings totaled 1.66 million head, 1 percent more than April 2015. Other disappearance totaled 76,000 head during April, 15 percent above 2015.

April beef production up

April 2016 U.S. beef production, at 1.96 billion pounds, was 2 percent above the previous year. Cattle slaughter totaled 2.41 million head, up 1 percent from April 2015. The average live weight was up 10 pounds from the previous year at 1,348 pounds.

Through the first four months of 2016, beef production totaled 7.90 billion pounds, up 4 percent from the same period a year earlier. Cattle slaughter totaled 9.44 million head, up 3 percent, with average live weight at 1,371 pounds, 18 pounds heavier than a year earlier.

April 2016 contained 22 weekdays and four Saturdays. April 2015 contained one less weekday, but one more Saturday.

Beef cow culling ahead of last year’s pace, but prices lag

Beef cows slaughtered under federal inspection were estimated at 199,300 head in April, 7,800 less than March, but 7,800 more than April a year ago, according to USDA.

Through the first four months of 2016, beef cows slaughtered under federal inspection were estimated at 791,200 head, about 25,500 more than January-April 2015.

While beef cow slaughter is ahead of last year’s pace, lower cull cow prices are contributing to retention of dairy cows. Including beef and dairy cows, the first quarter 2016 cutter cow price averaged $73.50 per hundredweight, about $4.30 less than the final quarter of 2015 and $34.11 less than the first quarter of 2015.

USDA’s latest outlook report projects cutter cow prices will average in a range of $72 to $77 per hundredweight in 2016, with highest prices forecast for the second quarter of the year.

Down from $99.56 per hundredweight in 2015, the 2016 average would be the lowest since 2013, when cutter cow prices averaged $77.56 per hundredweight.  end mark

Dave Natzke

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