Northern feds softer; southern trade slow

Cattle Market & Farm Reports, Editorials
Jan 31, 2005
by WLJ
— Calves, yearlings both slide downward.
Widening negative packer margins associated with significant declines in boxed beef prices resulted in northern fed cattle trade being $2-5 softer and southern cattle feeders still holding out for at least steady money through last Thursday. In addition, fed cattle supplies were starting to build up, particularly in Kansas and Texas, giving packers the idea they may be able to wait a week more and buy fed cattle cheaper.
Dressed trade started up in Nebraska on Wednesday at mostly $140, and by Thursday midday trade had concluded with the last activity at $138-139. Limited live trade ranged between mostly $86-88, with some isolated reports of $89. No trade at all was being reported in Kansas or Texas, and analysts didn’t expect it to happen, if at all, before Friday midday.
Packers were showing negative margins of $20-25 per head last Thursday, and prospects for even bigger losses appeared imminent as boxed beef prices continued to trend downward.
Between last Monday and Thursday, Choice boxed beef had lost $5.89 per cwt and Select declined $6.37. As of noon Thursday Choice beef was at $146.46, and Select was at $140.93.
Much of that decline was said to be the result of very lackluster U.S. beef demand during the weekend of Jan. 21-23. That sluggishness was due to the Noreaster storm that hammered the eastern seaboard and Midwest.
In addition, analysts said that seasonal beef demand has been below normal and that packers aren’t needing very many cattle at all to keep up with retail beef movement. According to the analysts at HedgersEdge.com, packers only need to process 565,000 head of cattle per week to keep up with current domestic beef demand.
For the week ending Jan. 22, 587,000 head of cattle were processed, meaning that more beef was produced than could be consumed. That weekly slaughter level is 60-70,000 head below “normal.” Through Thursday, last week’s slaughter volume was 471,000, 24,000 more than the same period the week prior. Several sources said slaughter for the week could end up over 600,000 head and that could result in packers getting out of the fed cattle market even more during the first couple weeks of February.
However, retail sources with stores in the eastern third of the U.S. indicated that consumers will pick up their beef buying pace during the next couple of weeks. In addition, the New England states and Pennsylvania could see a run on beef demand as a large majority of football fans stock up on beef products for their “Super Bowl” parties.
“That could create more empty meat case space that we will need to fill up during the first half of next month,” one eastern retailer told WLJ.
Live cattle futures spent most of last week narrowly mixed as they were waiting on cash cattle trade for direction. The February contract stayed below $90 for the week, closing Thursday at $89.25, up 12 points. April closed Thursday at $87.65, while June was at $82.30. The fact that cash had been trading at a slight premium to futures most of the winter was giving prospective cattle sellers optimism that $90 was attainable. Analysts said, however, other indicators would say otherwise.
Feeders,
stockers
struggling
Feeder and stocker cattle prices both trended downward last week with lighter, more immature calves showing $2-7 declines and heavier grass cattle and yearlings losing mostly $1-3, compared to two weeks ago.
Yearlings were softer last week due to a lack of support from feeder cattle futures, the bearish Jan. 1 Cattle-on-Feed Report, and animals being of poorer quality. In addition, several northern and eastern auctions cited inclement weather as deterring demand for all types of cattle.
“Market adjustments are occurring due to lower feeder cattle futures beyond the spot month. Quality has been average to attractive, with feeder cattle in medium flesh. Calves in thin to medium flesh conditions,” said the market report from Oklahoma National Stockyards, Oklahoma City. That barn still had over 14,500 head move through their facility, but prices were called mostly $3-6 softer on all classes of cattle.
Officials with Joplin Regional Stockyards, Joplin, MO, reported prices $2-5 softer and said, “Quality of light calves under 600 pounds not as attractive (compared to week prior). An unfavorable on-feed report and lower cash fed cattle and futures markets probably added to the price decline.”
March, April and May live cattle futures contracts all closed below the $100 mark last Wednesday and Thursday. Only two contracts were over $100 last Thursday—January at $104.17 and August at $100.02.
While there are a few cattle feeders showing slight profits on cattle being marketed right now, most are still in the red $30-50 per head, if not a little more. That is deterring most feeders from getting in the feeder cattle market at anywhere near steady prices, analysts said.
Uncertainty surrounding the Canadian border issue is also weighing on the minds of prospective feeder cattle buyers. If the border reopening is delayed, several sources expected a rally in feeder calf prices about March. However, if it isn’t, then a further slide is being projected. The extent of that possible downtrend was not being forecasted last week.
While stocker operators weren’t expected to be directly impacted by the border situation, some market analysts said demand for grass cattle was being minimized because of stocking rates already being larger than the previous five years and that most stocker operators were hoping to buy cheaper calves in the spring.
“If the border does open to Canadian feeder cattle, U.S. feedlots will probably try to get some of them heavier, more mature cattle rather than bringing in lighter U.S. calves that will require more time, and expense, on feed,” a Midwest market analyst told WLJ. “That means more calves will be available for grass placement, and they may be bought for less money than right now.”
During Superior Video Auction’s annual “Bellringer” auction held Jan. 19-21, the Friday calf auction appeared to be softer on calves for April delivery or later. In most instances, those cattle were $7-10 behind calves sold for immediate or February, early March delivery. Calves for immediate delivery ranged between $2 softer to $3 stronger, compared to average prices earlier that same week.
The CME feeder index, for 700- to 850–pound steers, closed Wednesday at $105.15, compared to $106.36 the previous week. — WLJ
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