The most recent Cattle on Feed Report was mostly in line with expectations. Supplies of cattle in this country continue to be on the historically smaller side. The “on feed” number came in at 97%, the “placement” number at 96%, and the “marketed” number came in at 90%.
With no bullish or bearish surprises in the report, the market had little reason to extend the recent rally, nor was there a fundamental reason to see a price setback. Going forward, live cattle futures price direction is likely going to depend what cash beef prices do over the next week and month.
Heading into summer holidays and grilling season, recent boxed beef values have been increasing to meet short-term demand. Gains have been noted for rib, briskets, loin, with the largest gain coming with rounds and chucks. Consumers want less expensive beef; it’s why chucks and rounds are in demand, as they are currently viewed as a less expensive cut of beef.
Last year, the trend was to grill steaks for the summer holidays. However, with inflation hitting the consumer at every level, it is starting to noticeably appear that the consumer is opting for cheaper hamburgers over steaks this year for Memorial Day, Father’s Day and July 4.
Looking at export demand, the most recent weekly beef export report showed that beef net export sales of 17,400 metric tons for 2023 were up 5% from the previous week and 7% from the prior four-week average. The three largest buyers were Japan (4,600 mt), South Korea (3,500 mt) and China (2,900 mt). While currently United States demand for beef for export remains a positive demand feature, I’m starting to take note of increased beef production in Brazil, which could compete against U.S. exports.
According to the Brazilian Institute of Geography and Statistics, Brazil’s livestock production in 2023 has increased nearly 5% in the first quarter of 2023 compared to same period in 2022. If U.S. beef prices get too high, will we see Brazil swoop in and offer cheaper beef as they have done recently with corn and soybeans? With increasing competition from Brazil along with expected increased cattle production in Australia, it may be hard to continue large exports of U.S. beef ahead.
While there currently is no specific sign of a top in the U.S. cattle market, a bit of caution is to be noted. Prices are at historical contract highs for live cattle and feeder cattle, and if there starts to be a demand pullback, some of the bullish sentiment may get removed from the higher priced values.
If you have questions, you can reach Naomi at [email protected] or find her on twitter @naomiblohm.
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