Heat Stifles Auction Prices, Wholesale Beef Advances
Steers and heifers sold uneven at auction last week, from $3 lower to $1 higher. AMS reporters said most of the higher trend was found in the North Central region, which, ironically, has suffered the most from this year’s drought.
Extreme heat across the Plains States through Thursday made cattle transport dangerous, with a few auctions cancelling sales in the Southern Plains and others with much smaller volumes of cattle.
“August is historically a good time to sell yearlings and this year is no exception as very good demand remains for yearling steers and heifers, especially those coming right off grass,” AMS reported. “Grass yearlings continue to come to town and the market is very active as these long strings are very desirable as buyers can fill their pens or whole yards of green, easy gaining yearling cattle. The heavier fleshed cattle that are backgrounded in a feedyard setting are also highly sought after as the winter and spring months of the CME Live Cattle contracts are very attractive.”
Auction receipts totaled 147,800 last week compared to 174,200 the previous week and 158,100 last year.
Monday produced another contra-seasonal rally for wholesale beef. Choice boxed beef gained $4.97 per cwt. to $329.80. Select boxed beef gained $5.53 per cwt. to close at $303.55. Last week the Choice boxed gained $28.57 per cwt., while the Select boxes gained $20.93 per cwt.
October live cattle futures fell 37.5 cents on Monday to $128.125 per hundredweight, up slightly from $127.875 a week ago, while October feeder cattle rose 15 cents to $165.775.
While retail beef buying has been strong lately, wholesale demand may decline in the weeks ahead as grocers complete purchases for the Labor Day holiday weekend. Additionally, slaughter so far this year is running 4.2% above last year’s levels, indicating higher beef supplies in the pipeline.
Longer-term demand remains favorable, assuming the U.S. economy continues to create jobs and recover from the COVID-19 pandemic, though a recent surge in cases from the Delta variant has stirred concern in commodity markets and contributed to sell-offs in crude oil futures.
December live cattle futures are currently trading over $11 above the nearby August contract, indicating market sentiment favors bullish supply and demand fundamentals later this year. U.S. beef export sales this year are running about 17% above last year’s levels, but overseas demand appears a bit weaker next year, considering the USDA’s 1.5% cut this week to its 2022 beef export forecast.