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Strong market

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Mar 31, 2017
Pete Crow

When was the last time you saw cattle markets rise with growing production? That’s what we’re seeing today. Selling more beef for more money is a rare sight in the beef industry. Market conditions are very healthy at the moment but we may have seen the topthis last week when the Fed Cattle Exchange sold fed cattle as high as $133; the week before they traded cattle at $136. Superior’s Fed Cattle Exchange is providing a mid-week snapshot of the cash fed market, but may have created a threshold to when the week’s trade will start. Perhaps there will be no more Monday or Tuesday trade.

Cattle feeders are starting to see closeouts come in at $300 per head, which will certainly heal some wounds. But now they have to buy replacement cattle and will certainly bid up the price of feeder cattle.

Futures markets remain at a huge discount to the cash market with April trading at $121.35 last Wednesday and June live cattle trading at $111.85. Traders seem to think it’s a sure bet that there will be a lot more cattle in early summer.

What they are not seeing is the outstanding demand for beef that we’re currently enjoying and the rise in beef exports, which is 30 percent higher than a year ago. This has surprised many in the wake of a strong dollar. Consumer attitudes are quite positive. The Consumer Confidence Index rose to 125.6 this March when analysts were expecting 115. Wages are also on the rise, pumping more dollars through the economy.

Let’s assume that we saw the winter high in the markets come in at $134 for fed cattle. We typically see a summer low come in about 15 percent lower than the winter high, which would put the seasonal fed cattle low in around $113.90. This may keep cattle feeders in the black ink.

One thing for certain is that cattle feeders want feeder cattle with a program behind them. Superior Livestock Auction released a report confirming this. IMI Global, the third-party verification company, analyzed Superior’s early 2017 sales and showed that Superior Verified Source and Age heifers brought a premium of 19 cents/cwt. And the steers brought an average $2.19/cwt. premium. Non-Hormone Treated (NHTC) heifers were 30 cents higher and NHTC steers were $4.69 higher. The Verified Natural Beef program average premium for heifers was $4.69 higher and steers saw an average premium of $5.48. Global Animal Partnership (GAP) program cattle averaged premiums of $10.03 on heifers and $10.40 on the steers.

It’s pretty clear that if you want to add value to your feeder cattle, being in some kind of program does the job. There are a lot of them out there like Top Dollar Angus and Reputation Feeder Cattle, which both use genetic evaluations to differentiate themselves from the pack.

Speaking of feeder cattle markets, there is a new auction market that has opened in Santa Teresa, NM. Mexico’s Chihuahua Cattlemen’s Association opened the auction market on the U.S side of the border to sell Mexican feeder cattle that have already been processed for export before sale. A buyer can load them up and go—without the lengthy import process. It’s run just like a U.S. auction market.

You’ve got to hand it to these Mexican cattlemen; they have wanted to do this for a long time so they can actually have some competitive bidding on their cattle. In the past, feeder cattle were bought in the country and then transported across the border by the new owner. These cattlemen had a bit more motivation since SuKarne beef packers came along.

SuKarne operates several state-of-the-art packing plants in Mexico and has several huge feedlots. They also set up hundreds of feeder cattle buying stations around the country and have a firm grip on the market.

The new Santa Teresa market has held 10 sales since January, attracting roughly 1,500 - 1,800 head a week. They have made it simple and easy to buy Mexican feeder cattle that are just as good in quality as you’ll find in the U.S. — PETE CROW

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