Though they've been focused on separate driving factors, beef demand and fed cattle markets will come together this summer on consumers' preferences for meat.
"Fed cattle markets are groping for a summer bottom amidst seasonally large slaughter and beef production," said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. "Meanwhile feeder markets appear to have found a bottom after being on the defensive since February."
Feeder cattle have been looking at new crop corn prospects for several weeks now, following the drought-driven price spikes from 2012. Feedlots have also taken advantage of lower feeder prices, ensuring suitable placements in the spring.
But feeder markets have been strengthening recently based on better demand, and Peel said the higher prices are expected into the fall, offsetting better feed prices.
"Strong feedlot placements the past three months have utilized the slightly larger feeder supplies indicated on January 1, plus some of the heifers intended as replacements this year," he said. But "feeder supplies are expected to tighten considerably in the second half of the year, with reduced feeder cattle imports and a smaller 2013 calf crop."
If heifer retention starts up again, feeder supplies will be further tightened. But Peel said fed cattle markets are currently most concerned with movement of animals through feedlots this summer.
"The summer low for fed cattle can occur anytime from now until Labor Day, so it is hard to call the low yet with so much of summer remaining," he said. "Fed cattle prices will take their cue from boxed beef prices this summer, especially as the seasonal peak in beef production passes into the third quarter."
Peel expects third-quarter beef production to remain high because May placements, in particular, included large numbers of very heavy feeders that will finish in the third quarter.
"From a different perspective, you can say that Choice boxed beef is currently holding at levels above anytime last year despite a so-so Memorial Day holiday and continued stormy weather in many regions," Peel said. "Choice boxed beef has dropped about $10 per hundredweight from the pre-Memorial Day high."
A strong July 4 holiday – likely to be an extended weekend for many – stands to potentially strengthen beef demand in July.
News source: OSU