3 September 2009

4 minute read

North America

Slaughter cow prices have been on a roller coaster ride this year, and currently are about $10 per cwt. below last year and $5 below the previous five year average (see Slaughter Cow Prices chart below).

Cow slaughter has averaged about 1.3 per cent higher for the year with increased dairy cow slaughter and lower beef cow slaughter. But cow slaughter has been below last year for the past several weeks when prices are usually at seasonal highs for the year. Cow prices are likely struggling due to weak domestic demand. Wholesale fresh, 90 percent lean, boneless beef prices are trading at $1.30 per pound compared to $1.80 last year, when all commodity prices had soared to high levels.

The stagnant economy with high unemployment has kept consumers away from restaurants. And ample pork supplies at historically low prices have offered stiff competition to beef. For example, wholesale fresh, 72 percent lean, pork trim is selling for 35 cents per pound compared to $1 last year. For prepared meat manufacturers who have flexibility in substituting ingredients, pork trim is a good buy relative to beef.

In addition, imports of manufacturing grade beef have increased 20 percent over last year’s historically low levels. Last year, imports of beef from Australia, the leading supplier of manufacturing grade beef to the U.S., were down due to the low value of the U.S. dollar. This year, imports have increased back to historic levels as the dollar increased in value and other countries that import beef have also dealt with poor economic conditions.

Cow prices are likely to struggle for the rest of the year. The second for 2009 Cooperatives Working Together (CWT) dairy herd retirement is in the process of sending 87,000 dairy cows and 3,200 bred heifers to market. The buyout should be complete by early October. The first herd retirement of 2009 removed 101,040 cows in late May, June and July. Details of both buyouts are available at; www.cwt.coop.

The typical seasonal price pattern for cows shows a sharp decline in October and November when heavy beef cow culling occurs. The CWT will also evaluate whether to implement a third buyout late in the year.

In addition, the western Canadian provinces are experiencing abnormally dry conditions. If that dry pattern continues, Canadian cow imports, which so far are near last year’s levels, could increase. And consumer demand is showing little signs of improvement as the economic recession lingers.

The Markets

The fed cattle market was active on Thursday with good packer demand for seasonally declining supplies. Increased boxed beef and byproduct values added support to fed cattle prices, which increased for the third straight week. Prices were up $1.50 per cwt. on a liveweight basis to $84.41, the highest level since late May. Dressed prices increased 73 cents to $131.67. Choice boxed beef prices advanced $1.53 to $143.67 as primal chuck, round, and loin prices exhibited seasonal strength.

Feeder cattle prices were mixed for the week. Yearling prices increased in Montana and Nebraska with good feedlot demand as the corn crop looks very good in the western Corn Belt. But Oklahoma prices were weaker. Calf prices were lower in Montana and Oklahoma, but saw a $4.84 recovery in Nebraska after the previous week’s $5.36 decline. Calf prices ranged from $106.50 to $122.50 at Nebraska auctions where buyers sorted for quality.

Corn prices were up slightly, and DDGS prices declined $1.75 per ton while WDGS remained a good buy at steady money.