Call the Market

The last six weeks have been agonizing for feedlots and cow-calf producers. Feedlots have capped out with a pitiful cash cattle market at $113 to $114 live or $178 to $180 dressed, while packers continue to be met with phenomenal beef demand and stellar boxed beef prices. Meanwhile, cow-calf producers have been fighting harsh winter storms while calving and hope there will be a buyer still traveling the countryside that's somewhat interested in their calves.

To say the crippling effects of COVID-19 ended with 2020 would be a blatant lie and the cattle market is a prime example of a market that's yet to recover. Cattlemen have done more than their fair share of carrying the market's burden and being patient. They hope better prices will soon circle back. But some producers are beginning to wonder if there will even be a spring rally in the cattle market.

Before you give up on this year's spring market, I want to point out a couple key points that could give you hope for what's ahead in the second quarter and beyond.

First, grilling season is right around the corner and the second quarter has historically been favorable to the beef industry. Beef prices through the first quarter of 2021 have surpassed our expectations as consumer demand continues to keep the market at an elevated price point. In the next week or two, a bottom should be found in the market and soon after we should start to see prices creeping higher again as grilling season gets fully underway. With more states opening restaurants and dine-in services, packers will see the continued demand from the retail sector but also (hopefully) an uptick in demand from the nation's food-service sector.

Looking through the last five years' data, four out of the five years saw significant increases in the price of choice cuts from April 1 to May 15. Last year (2020) was obviously a skewed year to look at and in 2019 there was actually a slight loss in that time frame for choice prices. But in 2018, 2017 and 2016, the market gained anywhere from $7.63 to $38.19 leading up to Memorial Day. With Americans potentially more anxious than ever to get outside and enjoy all that this spring and summer have to offer -- and to potentially take a family road trip or two -- this year's beef demand should only continue to grow and thrive.

Secondly, carcass weights are dropping dramatically and showlists are expected to tighten in the next 30 to 45 days. In the last two actual slaughter reports, steer carcass weights have dropped 20 pounds in just two weeks and heifers have dropped 16 pounds in the same period. The lower trending carcass weights are expected to continue and will increase packers' need to process more cattle on a per head basis as their tonnage lessens. Thankfully, the vigorous beef demand that the market's seen through the first quarter has helped work through front-end supplies and will soon favor feedlots' position.

Lastly, corn prices have thankfully begun to trade in a sideways holding pattern. The lavish cost of gains that feedlots are faced with continues to be a hindering factor for the feeding sector but seeing the corn market trade steady is far more comforting than the sharply higher trade that the market was seeing. It's hard for feedlots to get too excited about procuring calves to refill their pens when the cash cattle market is as sorry as it is, but if in the next two weeks the cash market can rally like it needs to, feedlots can somewhat stomach these high corn prices --if their output price is more rewarding.

In three short days, spring will finally be upon us and (hopefully) we can begin to see markets rally. We knew that getting through the first quarter of the year was going to be a challenging uphill battle, but thankfully the second quarter is within sight. The market should start to improve as spring nears.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

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