Tuesday, March 22, 2011
Beef prices hit all-time highs- What does this have to do with kashrus?
Chicago cattle futures rebound as beef prices hit all-time highs
Bruce Blythe, Business Editor -updated: March 21, 2011
Cattle futures in Chicago bounced back from last week’s slide amid record beef prices and expectations animal supplies will remain tight as the peak demand summer grilling season approaches.Choice-grade boxed beef prices, a wholesale market benchmark, averaged $1.8826 a pound earlier today, up 0.75 cent from the end of last week and at their highest point since prices briefly topped $2.00 in late 2003, according to U.S. Department of Agriculture data. Wholesale beef is up 12 percent since mid-February, reflecting rising exports and improving domestic demand.
Slaughter-ready cattle prices may have established a near-term peak with a record rally earlier this month, said Darrel Peel, a livestock analyst with Oklahoma State University. However, the higher prices this year stemmed from more than just seasonal factors and “reflects the underlying strength of supply fundamentals,” Peel said in a March 21 report.
In trading March 21, CME Group cattle futures for April delivery rose 1.95 cents to $1.136 a pound. While futures are down from a record $1.18425 March 10, prices averaged $1.10 so far this year, up 22 percent from an average of 90.45 cents during the first quarter of 2010, based on the closest-to-expiration contract.
Today’s price gains are largely a technically-driven rebound from losses last week, said Troy Vetterkind, owner of Vetterkind Cattle Brokerage in Chicago. Cattle futures fell nearly 5 percent last week as Japan’s earthquake and tsunami triggered a broad commodity market sell-off.
Cattle futures may rise further before running into “meaningful” chart resistance at $1.14 to $1.15 a pound, Vetterkind said.
The cattle market may have difficulty rising beyond that level, Vetterkind said, citing concern that demand from Japan, one of the largest foreign customers for U.S. beef producers, may suffer.
“You’re going to have people willing to sell it on any rally attempts,” Vetterkind said March 21, referring to cattle futures. “We’ve got to get a better handle on how much beef Japan is going to buy.”
Meatpackers may reduce slaughter again this week in an attempt to keep beef prices high, Vetterkind said. Last week, U.S. cattle slaughter totaled 618,000 head, down 19,000, or 3 percent, from the previous week, according to USDA data.
Cattle futures rose 25 percent last year and remain in a longer-term uptrend, analysts say, after the 2008-09 recession and a surge in feed costs prompted beef producers to cut herds. Corn prices have nearly doubled since the middle of last year, making significant herd expansion unlikely. At the start of this year, the U.S. cattle herd shrank to a 53-year low.
Food retailers will soon step up meat purchases as the weather warms and people grill out more, which means beef prices probably will remain elevated, analysts say. CME futures suggest cattle will rise at least another 5 percent by the end of this year.
October and December cattle futures settled above $1.19 March 21.
The USDA’s monthly Cattle on Feed report, released March 18, had few surprises and little impact on trading today, analysts said.
Still, the government said the number of cattle sent to feedlots for fattening fell for the first time in seven months, a harbinger for spring and summer feedlot supplies.
Beef producers in Texas, Kansas and other top cattle states sent 1.664 million young animals to feedlots during February, down 0.6 percent from the same month in 2010, the USDA said. That was the first year-over-year decline since July. From August through January, monthly placements compared with a year earlier rose on average by 6.3 percent.
Placement declines likely will continue because more cattle will be kept on pasture after the winter ends, Vetterkind said.
“Now that we’re close to the spring and summer grass season, placement numbers are going to drop… as more cattle are kept on forage,” Vetterkind said.
Additionally, cattle supplies outside feedlots are “very current,” according to analysts Steve Meyer and Len Steiner, inventories are not in excess.
“The expectation is that feedlots will find it increasingly difficult to find enough feeders to maintain the placement rates we saw in 2010,” Meyer and Steiner wrote in a March 21 report. “Feeder cattle prices have jumped sharply in recent weeks as competition for the ever shrinking supply heats up.”