The forecast for 2017 commercial beef production was lowered by 140 million pounds to 26.6 billion pounds, on slower expected marketing pace for fed cattle through the remainder of the year, despite heavier cattle dressed weights and higher cow slaughter.

For 2018, the commercial beef production forecast is lowered from the previous month as a slower rate of placements during the second half of 2017 is likely to result in reduced steer and heifer slaughter in the first half of 2018.

Forage opportunities could expand for backgrounding feeder cattle

Favorable weather in the Southern Plains has improved pasture conditions on par with this time last year. Although improved forage conditions in the Southern Plains may increase incentives to background calves, placements in feedlots during the fourth quarter are expected to remain relatively large given the availability of cattle outside feedlots.

However, expected declines in cattle feeding margins will likely encourage feedlots to bid down the price of calves in the coming months.

Prices reported by AMS for medium-frame feeder steers weighing 750 to 800 pounds in August declined about $7 per hundredweight (cwt) from July.

Prices in early September moved higher, as improvements in forage conditions have likely provided cow-calf producers and backgrounders with the ability to hold off selling at less favorable prices. The price forecast for feeder steers in the fourth quarter is in the range of $140 to $146 per cwt, turning lower in the first quarter of 2018 to $132 to $140 per cwt.

Fed steer prices steady after large summer drops

Fed steer prices have seen little support over the past month as the price reported for the week ending Sept. 10 for 5-area fed steers was $104.92 per cwt, down sharply from this year’s high of $144.60 per cwt during the first week of May.

According to the August NASS Cattle on Feed report, the number of cattle on feed on Aug. 1 was up 4 percent year over year, and the number of cattle on feed over 120 days on Aug. 1 was up 8.6 percent from July, both in feedlots with 1,000-head-or-greater capacity. This likely implies that feedlots will have sufficient cattle to sell going into the fourth quarter, which could depress fed cattle prices.

Fed steer prices may possibly be pressured in the short term as ample supplies of cattle are available to be marketed in the fourth quarter. In addition, an abundant supply of competing meats are also available. The price forecast for the 5-area fed steers in the fourth quarter is $107 to $113 per cwt.

Fed steer prices are forecast to make a seasonal rebound in the first quarter of 2018 to $110 to $120 per cwt.

Wholesale prices present buying opportunity for retailers

The ERS-calculated retail price for Choice beef dropped from June ($620.70 per cwt) to July ($610 per cwt), relatively unchanged from 2016 price levels for the same period. At the same time, AMS reported the Choice beef cutout value (negotiated sales) averaged $192.35 per cwt for the week ending Sept. 8.

That cutout value was down sharply ($59.21) from this year’s high of $250.86 per cwt, and $2.86 lower than the same week last year. Moreover, the Choice-Select spread tumbled from historic levels of above $30 to about $2 on lower demand for the most expensive cuts (i.e., the middle meats).

However, the drop in wholesale Choice beef prices may have spurred boxed beef sales; since mid-August, beef loads have sold for delivery in 0 to 21 days and 22 to 60 days out.

Beef exports increase steadily in July

Year-over-year July U.S. beef exports increased by 10 percent to 239 million pounds. The 22 million-pound increase was contributed mostly by Japan (+13.5 million pounds), Hong Kong (+5.4 million pounds) and Canada (+1.4 million pounds). Japan was the highest U.S. export destination, receiving 31 percent of total shipments in July 2017.

The Foreign Agricultural Service weekly Exports Sales report shows year over year, larger U.S. exports to Japan in August, despite the Aug. 1 implementation of the Japanese safeguard that raises the tariff on U.S. frozen beef. Increased tariffs were likely partially offset by lower U.S. domestic prices and the relative weakening of the U.S. dollar against the Japanese yen.

Beef imports up in July 2017

U.S. beef imports increased in July 2017 by 11 percent (+31 million pounds) from the same month a year ago to 301 million pounds. This is the second consecutive month of year-over-year increases in imports in 2017. Mexico (+57 percent) and Canada (+18 percent) together shipped 30 million pounds more beef into the U.S. in July 2017 than in July 2016.

U.S. beef imports from Brazil declined by 31 percent (-5 million pounds) compared to July 2016 and 32 percent less than June 2017. This decline stems mostly from the June 22 U.S. ban imposed on imports of fresh or chilled Brazilian beef (Perdue USDA halting import fresh brazilian beef). However, increased imports from Nicaragua and Uruguay together (+5 million pounds) were about equal to the decline in imports from Brazil.

July 2017 U.S. cattle imports up from a year ago

U.S. cattle imports in July 2017 were 118,000 head, an increase of 36,000 head (+44 percent) from year-earlier levels, largely due to a 30,000-head increase from Mexico. July 2017 saw the first year-over-year increase in live cattle imports from Canada for 2017.

On a year-to-date basis, the sharp decline in imports from Canada (-87,000 head) was more than offset by increased imports from Mexico (+131,000 head). Mexico likely took advantage of higher feeder cattle prices in the U.S. by increasing shipments during late spring and summer.

Of the 2017 cattle imports from Canada, the proportion of slaughter animals relative to feeder cattle increased compared with year-earlier levels. However, this may change as Agriculture and Agri-Food Canada has reported poor pasture conditions and tighter supplies of feed in Canada due to drought conditions that may contribute to increased shipments of Canadian feeder cattle to the U.S.

The AMS weekly trade report since mid-August has shown a slight uptick on feeder cattle from Canada. Based on the year-to-date pace of import growth from Mexico and anticipation of the potential impact of the Canadian drought, U.S. cattle import forecasts for 2017 and 2018 have been revised upwards from the previous month to 1.715 million head and 1.740 million head, respectively. Live export forecasts were left unchanged.  

Analyst Lekhnath Chalise assisted with this report.

References omitted but available upon request. Click here to email an editor.