Futures give hope for steady cash feds

Cattle Market & Farm Reports, Editorials
Feb 7, 2005
by WLJ
— Other indicators bearish.
— Light volumes, moisture boost calf prices.

Fed cattle trade activity was following the pattern set the previous three weeks with northern trade happening Thursday and southern cattle not being marketed until Friday. Through midday Thursday Nebraska cattle feeders had sold 15-20,000 head at mostly $140-141 dressed. No trade activity was reported in either Kansas or Texas, as packer bids were still hovering around $86, while asking prices from prospective sellers ranged $90-91.
While early trade in northern feeding areas was $1-2 higher than two weeks ago, packer bids were starting to be pulled back with most getting back down into the $138-139 range, steady with the previous week. Analysts thought steady money might be possible, but it wouldn’t be on a large-trade volume.
Nearby futures contracts appeared to be the saving grace to cash feds last week, as February continued to hover just above the $90 mark. Traders speculated that cooler, wet weather was slowing down cattle marketing rates along with the uncertainty that is still circulating about the Canadian border situation.
However, other trade analysts said expanded boxed beef movement last week wasn’t enough to offset a beef production surplus the previous couple weeks and that widening packer losses were keeping demand for slaughter-ready cattle depressed and limiting much chance for a market rally.
In fact, the ongoing market situation was enough to force Tyson Foods Inc. to announce last week production slowdowns at its Cactus, TX, cattle processing facility. The company also announced that chain speeds have been slowed at its Grand Island, NE, plant for the past several weeks.
Tyson earlier this year announced several temporary facility shutdowns in the Northwest and Far West regions of the country.
Swift & Company and National Beef have also slowed production at several facilities.
Slaughter volume last Monday through Thursday was 465,000 head, 5,000 below the same period the week previous. For the week ending Jan. 30, total cattle slaughter was 589,000 head, 2,000 head more than the week previous but 10,000 head below the same week last year.
Several analysts reiterated that weekly cattle slaughter probably only needs to total 560-570,000 head to keep up with current beef demand levels. Even though the last few weeks have shown slaughter levels below a year ago, they are ahead of what consumption is right now, analysts said.
On top of that, packer margins ranged between a negative $45-50 per head during the middle part of the week, and that was keeping most prospective buyers from bidding even close to steady money, compared to two weeks ago. For the week ending Jan. 30, the average cattle price was $88.21 live, $139.78 dressed.
Boxed beef prices continued their slide through most of last week, leading to the widening losses reported by processors. As of Thursday midmorning, the Choice boxed beef cutout was at $142.31, down from $146.10 the previous Thursday. Select was at $137.70, compared to $140.58 the previous week.
Some concerns were being raised that cattle feeders might start losing the currentness that they have seen the past few months. The primary indication of that, according to analysts was the narrowing of the Choice/Select spread to under $5 last Thursday. The previous Thursday, that figure was still around $6.50.
While weather deterred a lot of producers from shipping calves to market in the southern third and central Plains of the country last week, prices were called mostly steady to stronger.
The buyers in attendance at most central and southern auctions were actively snatching up lighter feeder and stocker steers for $1-3 more than two weeks ago. Heifers were being bought at mostly steady money, with isolated reports of $1-2 less being anted up.
Recent moisture has once again spurred stocker operator demand because of forecasts for extended good grazing opportunities, southern auction barn managers reported.
Stocker operators weren’t scared off by the weather. Several of those operations, including some closed-in facilities, are able to get cattle acclimated to both the new operation and some extra supplemental feed, specifically corn and other cheap feed grains, that they will be on over the next four to six weeks.
In northern areas of the country, price gains were up as high as $5 as weather was reportedly very good for both placing cattle into feedlots and pasture conditions. In addition, volumes in the northern tier were very small, being 50-60 percent below the previous few weeks.
Heavier weight, more placement ready cattle were seeing softer prices paid last week, despite continuing cheap corn prices. A large area of the country showed $1-3 less being anted up by buyers for yearlings.
Last Thursday morning, March corn futures were at $1.94 and several reports indicated cash corn at $1.65-1.80 per bushel, or $2.95-3.25 per cwt.
However, the lack of any significant upturn in the cash fed market, and continued $25-40 per head losses by a majority of cattle feeders, kept prices for heavier weight calves and yearlings depressed. Wet weather, while being good for grass prospects, also hurt cattle feeder demand as southern feedlots were very muddy from recent moisture, making it difficult for trucks to get around and for labor to meet the demands of new placements.
The CME feeder cattle index, for 700-850 pound steers, was hovering around $103 last Thursday, compared to $104.46 the previous Thursday.