Packers cannot harvest enough cattle to meet demand or supply

Jeff Swenson

Prepared and written by Jeff Swenson, DATCP Livestock and Meat Specialist. The Market Update draws information from several sources, including trade publications, radio broadcasts, agricultural news services, individuals involved in the industry as well as USDA NASS and AMS reports.

Jeff Swenson

The Choice beef cutout value broke the $300.00 level on Tuesday and was $306.37 Thursday afternoon. That’s $75.00 higher than this time last month. Restaurant demand has picked up while retail demand remains strong.  Seasonally, we would expect to see demand increase now, and with restaurants expanding dine-in services there’s even more call for beef.

The question many are asking, however, is how come fed cattle prices have dropped while beef prices have increased? Weekly harvest numbers have been decreasing, and lack of employees, the largest component of modern day packer capacity, is a key factor. Packers cannot harvest enough cattle to meet demand or supply, and that’s causing a growing pool of market ready cattle. Supplies should back off somewhat by mid-June. One packer that buys only beef breed cattle had enough cattle contracted to sit out of Midwest markets this week.

Hog and pork prices continue upward

This is a somewhat different scenario than cattle since there is strong demand coupled with tightening supplies. The cash hog price Thursday was $89.93/cwt with carcass basis price at $116.42/cwt. Estimated harvest last week was 2.454 million, 19,000 head lower than the previous week. 

Not that anyone has forgotten the nightmarish situation that played out a year ago, but it’s worth mentioning the weekly harvest number is 914,000 higher than the same week last year. Yesterday’s June Lean Hog futures contract AND the June Live Cattle contract closed at $114.42. This isn’t something that happens often. We would have to go back to 2001 for the last time Lean Hog contracts were higher than Live Cattle contracts.  Pork exports had a good week with 48,200 metric tons sold to foreign buyers.

Beef exports up

Beef exports totaled 124,808 metric tons (mt) in March, up 8 percent from a year ago and the second largest of the post-BSE era. Export value broke the $800 million mark for the first time at $801.9 million, up 14 percent year-over-year. For the first quarter, beef exports pulled even with last year’s pace. Beef export value equated to $348.66 per head in March, up 13 percent from a year ago. March exports accounted for 14 percent of total beef production.

March pork exports were record-large at 294,724 mt up 1 percent from last year, and set a new value record at $794.9 million (up 4 percent). For the first quarter, pork exports were 7 percent below last year’s pace in both volume and value. Pork export value equated to $67.71 per head, up 6 percent from a year ago. March exports accounted for 32.2 percent of total pork production.

March exports of U.S. lamb were up 54 percent from a year ago to 1,089 mt, valued at $1.5 million (up 22 percent). For the first quarter, export volume increased 64 percent from a year ago to 3,268 mt, but value was down 4 percent at $4.3 million.

Crop update

Wisconsin corn is reported 27 percent planted, 1 day behind last year but 5 days ahead of the 5-year average. There are some reports of corn emerging in southern Wisconsin. Soybeans are reported 16 percent planted, 2 days ahead of last year and 8 days ahead of the average. Nationally 46 percent of corn has been planted and 24 percent of soybeans.

State market prices remain steady

Choice beef breed steers and heifers at Wisconsin and surrounding state auction markets were steady to $2.00 lower. High-yielding, high-grading cattle brought 100.00 to 118.00/cwt. with some groups to $120.00/cwt and above. Choice and Prime Holstein steers were steady to $1.00 lower this week bringing $90.00 to $102.00/cwt. There were some packages of Holstein steers selling $103.00/cwt and up. 

Silage fed, under finished or heavy dairy breed steers brought $70.00 to $92.00/cwt. Dairy x Beef steers were mostly $95.00 to $114.50/cwt. Cows were $2.00 lower at $45.00 to $62.00/cwt. Blemish free cows in fleshier condition were selling to $70.00/cwt with a small sampling selling higher.  

Doubtful health and thin cows were bringing $45.00/cwt and down. Dairy breed bull calves were higher at $50.00 to $175.00/cwt with heavier, well cared for calves up to $225.00/cwt.  Beef and Beef Cross calves brought up to $345.00/cwt.