Everything’s looking up…still!
— Markets continue to be unseasonably warm
Cattle buyers got down to business last week and that business was likely pleasing to cattle feeders. By close of trade last Thursday, over 114,000 head of cash fed cattle had been confirmed sold on the negotiated market. Prices Thursday reached $129-134 live and $208-220.
“Trade volume will be adequate to limit any carryover,” Andrew Gottschalk of Hedgers Edge. “The latter results will continue to keep the producer in the driver’s seat.”
Live cattle futures also saw increases last week, as well as a narrowing basis as the April contract comes closer to a close. By Thursday’s settle, the April contract had gained a net $4.23 to settle at $129.63. The June contract improved over last week, but not quite so impressively, gaining a net $1.78 to settle at $116.48.
Not to be outdone, the Choice cutout also saw gains. At $215.72 on close of trade last Thursday, the Choice cutout has reversed its short-term movements and seems to be heading back up. The recent high was over $224 back in late March.
“Our target for the Choice cutout is $222,” said Gottschalk. “The news to-date has been very positive. However, caution is warranted, as it is not uncommon for the second quarter high to be realized during April.”
Though the beef cutout has been surprisingly resilient lately, and retail beef prices have increased from their recent lows, a longerview perspective is helpful.
“Retail beef prices in March increased compared to the previous month but they were still about 5 percent lower than the previous year and down 7.9 percent from the peak in May 2015,” reported the CME Daily Livestock Report.
“What stands out in the last 12 months is that retail beef prices have been higher than one would expect given the long run relationship [between wholesale and retail prices]. Some of this may be due to the retail price data series itself, since it is not a weighted by sales volume. The other reason may be due to the fact that wholesale beef prices last fall and winter declined at a fairly rapid clip and retailers have taken their time to adjust.”
The big question continues to be consumer demand.
Thus far, there has been cause for optimism.
“[D]emand for the upcoming spring/early summer grilling season has picked up substantially,” noted Troy Vetterkind of Vetterkind Cattle Brokerage.
“This is a trend that is expected to continue for at least the next couple of weeks and will keep cutouts moving higher for the foreseeable future.”
Demand for feeder cattle has continued strong. Last week, almost every one of the surveyed auctions reported unanimous increases in prices paid for feeders.
Medium and large 1-class (#1) steers weighing between 700-800 lbs. ranged from the $130s-150s. Hopefully the $120s and lower prices are a thing of the past, at least for the near future.
California: At the Cattlemen’s Livestock Market in Galt, everything was called steady. Despite that, the range for benchmark steers upped its lower end with $120-135.
Colorado: The La Junta Livestock Commission sold almost double the volume of cattle last week compared to the prior week. Light steers were up $3-5 with instances of up $10, while heavier steers sold mostly steady. Heifer calves under 500 lbs. sold for $2-5 higher, while heavier calves sold upwards of $8. Yearlings sold steady. Number 1, 7-weight yearling steers sold between $136-142.50.
Kansas: At the Winter Livestock Feeder Cattle Auction of Dodge City, roughly half the volume of cattle sold last week as sold the week before. Despite that, prices in all categories of feeders were up, mostly $2 with instances of up $5- 12 on 3-weight cattle. Benchmark steers ranged from $136.75-147, inclusive of calves.
Nebraska: The Huss Platte Valley Auction saw sale volumes almost double compared to the prior sale held two weeks before. Steers under 800 lbs. were called up $8-9, while heavier steers were up $10-18. Heifers were called up $6-15. Several groups of benchmark steers ranged from $146-158.
New Mexico: The Clovis Livestock Auction saw steady volumes and rising prices last week. Feeder steers were up $3-7 with instances of up $9 on 7-weights. Heifers were up $4-5 with instances of up $9 on 5-weights. Two large groups of #1, 7-weight yearling steers averaged $138.50 for the heavy group and $150.88 for the light group.
Oklahoma: The OKC West-El Reno sale sold almost 13,000 head last week at mostly higher prices. Feeder steers were up $2-5, and heifers were up $1-3. Light calves were called weak to down $2 on limited demand, while calves over 500 lbs. were up $2-4. Several groups of benchmark steers sold between $136- 146.50, inclusive of calves.
South Dakota: The sales volumes were down last week at the Hub City Livestock Auction, but the prices were up. Steers were thinly traded, but steady to up $1 where comparable sales existed, with the exception of 9-weights which saw $2-5 increases. Heifers were up $1-4 where tested. Over 200 head of benchmark yearling steers traded between $141.25-156.25.
Texas: The Amarillo Livestock Auction sold fewer cattle last week for more money. Feeders were called steady to up $3 on limited comparable sales. Trade was called moderate with moderate to good demand. Only eight head of #1, 732- lb. yearling steers were reported in the benchmark class. They averaged $137.94.
The feeder cattle futures also gained last week. The April contract traded sideways on the week-to-week comparison, gaining only a net 10 cents to settle last Thursday at $137.90. The May contract on the other hand gained a net $1.35 to settle at $139.75.
“Don’t see anything to slow this train down yet and any near-term corrections due to the market being overbought are going to be supported,” opined Vetterkind optimistically. — Kerry Halladay, WLJ Editor