Packer
Declining cattle futures prices continue to pressure cash prices. The cheaper inventories are working to pad the packer’s pocket as evidenced by a few plants operating on Saturdays.
Cattle feeding margins declined nearly $100 per head last week with lower cash bids and rising costs. Pork producer margins remain mired in red ink.
Friday’s COF placement numbers provided a friendly lean to a market that has suffered consecutive weeks of falling futures and lower cash bids. Sellers hope to leverage the short week ahead with higher asking prices.
A large contract foodservice company claims the nation’s largest beef packers conspired to fix prices and drive up profit margins from 2015 through 2021.
Volatility contributed to a strong basis early last week and cash traders benefitted by waiting until late week to sell cattle.
Packers were forced to add to their inventory and pushed prices $2 higher last week. The surprises in the Cattle on Feed report may offer a reason to push prices lower, yet feedyards maintain the upper hand.
Cattle feeders saw $1 to $2 gains in all regions during the week, but a struggling futures market and an unfriendly placement number in Friday’s Cattle on Feed report may drag on cash prices in the short-term.
Price-fixing allegations were again levied against America’s largest beef packing companies, this time by a group of small distributors.
Fed cattle trade posted gains last week, but the rally was not incentivized by wholesale beef prices, but rather pushed by limited supplies of ready cattle.
As the board moved on its second leg down last week, packers motivated sellers with additional kickers on their offers.
The North American Meat Institute releases its 2023 Continuous Improvement Report with data submitted for this year’s report covering an estimated 90% of all meat sold in the United States.
Higher cattle prices and declining wholesale beef prices pushed packer margins further underwater last week. Pork producer margins inched into the black.
Higher slaughter cow prices are the result of strong lean beef markets and the related growth in breeding demand for cows. The current price of 90 percent lean beef is 17.3 percent higher year over year.
As the futures continued to grab new ground throughout the week, cattle feeders continued to find confidence in higher asking prices.
Market leverage remains solidly with cattle feeders, but packers continue working their options to hold prices in check.
Tyson Foods is deploying autonomous refrigerated box trucks to bolster Tyson routes in Northwest Arkansas. Operating 18 hours a day, these driverless trucks will deliver products to distribution and storage facilities.
Packers narrowed the North-South spread last week and through a series of factors including the weather, have seen the marketing leverage swing in their favor.
Environmental groups are pushing U.S. securities regulators to thwart JBS SA’s New York share listing over concerns about the world’s largest meatpacker’s impact on deforestation, climate change and other issues.
When $1 lower bids failed, packers reduced bids even more, encouraging some feeders to sacrifice ground to secure a spot for some ready cattle.
Cattle inventories simply are not large enough for the packer to build any market leverage. Reluctantly, packers bought cattle at steady to higher money and cowboys will seek more this week.
Cattle feeders were rewarded in last week’s standoff with higher prices in all regions. Packers will continue to slow harvest rates in an effort to hold the market in check.
Packers are picking around the edges and dragging their feet when looking at higher asking prices, but the bull market remains in place with the cattle feeder gaining leverage each week.
With estimates of 82% capacity utilization of fed beef plants next year and 65% for cow slaughter plants, Nalivka says, “Rest assured - there will be decisions made.”
The spread between cattle feeding margins and beef packer margins has now reached $500 per head as packing losses increase. Pork producer margins are the highest of the year.
Cattle feeders continued to leverage tight supplies of market-ready cattle to push markets higher until packers were forced to be more aggressive.
There’s a $400 spread between cattle feeding margins and packer margins – now in the cowboy’s favor. Cattle harvest is lower as packers reduce hours, a signal their margins are in the red.
Generally, a good week for agriculture with cattle steady to stronger despite a significant rally in the corn market. Packers try to hide their hand, but without inventory they must pay up to keep plants running.
Packers searching for cattle last week hinted at their looming predicament – showlists too small to utilize current industry capacity.
Attractive wholesale beef prices have encouraged packers to give up some inventory with aggressive slaughter numbers. Packers may need to get creative in the weeks ahead as numbers decline.
Cattle feeding margins improved $43 per head last week as cash prices gained nearly $2 per cwt.