Feds stall on packer losses, beef demand

Cattle Market & Farm Reports, Editorials
Feb 28, 2005
by WLJ
— Moisture still helping calf market.
— Feeder cattle losing ground.

A Thursday rally in the live cattle futures market kept last week’s fed cattle trade at a stalemate as prospective sellers had more impetus to hold on for at least steady money, compared to the previous week. However, analysts weren’t sure packers would ante up that much, as processing margins continued to go deeper into the red last week.
As of press time last Thursday, the only trade for the week was an anemic 13,000 head in Nebraska at mostly $137-137.50 dressed. Other northern cattle feeders were waiting for packers to bid $139 and prospective sellers in more southern feeding areas were asking mostly $89. Packer bids in the south were hovering around $85 live.
Packer margins continued to be on the negative side of the ledger last week. In fact, several days last week showed packers losing up to $60 per head, and prospects weren’t looking to improve anytime soon.
Boxed beef markets continued to struggle last week. As of midday Thursday, Choice beef was leaving processors’ warehouses at $139.28, while Select was selling for $136.21 per cwt. Choice lost about $2.50 off the previous week’s high, while Select lost a little over $3 in value over the same period of time.
Boxed beef movement was called moderate at best for the previous two weeks, with only one day showing over 600 total loads moved via the cash market. Several market analysts said consumers in the eastern half of the country are still trying to get through the winter doldrums, and that it could be another couple of weeks before they start to kick into grilling mode and start demanding beef, especially higher-quality middle meats.
Packer demand for live cattle was also said to be waning due to slaughter volumes exceeding weekly beef demand. For the week ending Feb. 19, USDA reported 576,000 cattle processed, 10-15,000 head more than what analysts said needed to be processed to meet current weekly beef demand. Most analysts said 560-565,000 head of cattle would meet current weekly demand rates. Through last Thursday, 451,000 head of cattle were processed, according to USDA, putting packers on pace to process around 550,000 head of cattle.
“They just don’t need many cattle right now,” said Reed Marquotte, analyst with M&Z Livestock Analytics. “Demand is anemic, beef movement is very slow and weather still remains very wintery across the country. One or more of those things have to change before packer demand for cattle picks up.”
The only glimmer of optimism for cattle feeders last week was Thursday’s 10-30 point rally in live cattle futures. However, analysts even said that wouldn’t be enough to probably rally the cash market because most packer buyers based procurement decisions on the April contract.
“February is basically an expired contract, and packers will try to convince feedlots that they need to base their marketing tactics on April, which is currently under $87,” Marquotte said.
“The other indicators aren’t there to justify holding out for much more than that, unfortunately.”
gain ground
The most positive U.S. cattle market news was coming out of stocker cattle and calf circles last week as spring grazing forecasts continue to improve and alternative feed resources remain much cheaper than normal. Calf prices nationwide ranged between mostly steady to $3 higher last week, with most auction barns reporting strong demand and very active bidding.
Rain and snow continues to inundate southern and Far West grazing areas and that continues to improve pasture and rangeland conditions and extend the outlook for the length of the 2005 grazing season.
In addition, old crop corn continues to be available to a majority of areas at around $3 per cwt, making it possible for stocker operators to purchase cattle a little earlier than normal and putting them on a little hotter feed ration before being turned out to grass or other pastures. Other feedgrains, specifically milo, barley and feed wheat, are also very cheap and some operators are utilizing them in tandem with cheaper hay.
There were several auction barns, particularly in the Southwest and southern Plains, last week reporting some instances of four-weight steers getting back into the $145-150 per cwt range. In addition, higher quality heifers, specifically those called “more replacement heifer quality,” were bringing a $5-8 premium to their “commodity quality” counterparts, auction sources said.
hurt by
fed trend
Yearlings and heavier replacement-ready calves were struggling last week as cattle feeding profits are still non-existent and there is still some possible pressure coming from Canadian feeder cattle entering the U.S. beginning in March.
Feedlot order buyers were seen paying $2-3 less than the previous few weeks.
In addition to cattle feeders reporting losses on most cattle marketed during the past few weeks, pen conditions continue to be muddy, which is lessening the desire to bring in cattle to put on full feed.
The CME feeder index, for 700- to 850-pound steers, was at $101.61 last Wednesday, compared to $103.89 the previous Wednesday.