Fed cattle trade $4-7 higher

Cattle Market & Farm Reports, Editorials
Mar 12, 2007
by WLJ
Relatively active, and substantially higher fed cattle trade took place last Wednesday, bucking the trend of late week trade over the previous few months. Fed cattle prices on approximately 20,000 head were trending as much as $4-7 higher last week, with prices reportedly in the range of $98 live basis in the southern Plains, an increase of $4 over the prior week. In the north and Corn Belt, dressed prices were reportedly as much as $7 higher in some areas, with prices in a range of $154-155 dressed in Colorado, Nebraska, Iowa and Minnesota. Last Thursday, in the wake of $98 trade the day earlier, feedlots were busy raising prices on their remaining showlists to take advantage of the bullish movement in the market. Particularly in the southern Plains, feed yards were asking $99-100 for slaughter-ready cattle.

The prior week’s blizzard conditions in the central and northern Plains, as well as portions of the Corn Belt, also helped move the market as conditions prevented the movement of cattle in some areas and caught some packers short bought. However, much of the upward movement was spurred by an anticipated shortage of Choice-grading cattle in the weeks ahead as a result of winter weather conditions in cattle feeding areas early this year. Although prices are moving higher, grading percentages remain above early expectations. Last week, USDA reported that 53 percent of all slaughtered cattle were grading Choice, although most analysts expect that to drop as packers move in to the spring supply. That expectation has buyers forward purchasing to meet the increased demand for Choice middle meat products as grilling season gets underway in the southern states.

The forward purchasing last week was pushing boxed beef prices, for both Choice and Select product, markedly higher. Last Thursday, Choice product was trading at $158.34, up $1.19 and Select gained 65 cents to trade at $147.87. Prices were as much as $7 higher than the previous week. Those gains were helped by a $4.38 jump in the Choice cutout and a 68 cent rise in Select boxed beef prices last Wednesday. Middle meats, in particular Choice rib primals, benefitted from the active buying spree at the wholesale level, gaining $19 per cwt. last Wednesday. Choice loin primals gained $8 during the day. End meats also got a boost as buyers look for any available bargains to meet rising demand going into spring.

In an effort to capitalize on rising boxed beef prices last week, packers were ramping up their slaughter volumes. On Thursday last week, packers harvested an estimated 126,000 head which was 8,000 head more than the previous week and 4,000 more cattle than the same day last year. For the week through last Thursday total harvest was 495,000, up from the prior week’s total of 488,000 and above the same period last year, which totaled just 484,000 head.

Cow beef cutouts were pressured last week by high slaughter volumes at cow processors’ last week. The cow beef cutout value declined 66 cents last Thursday to settle at $109.37. The cow beef cutout value was more than $2 lower than the previous week and down $3 from last year’s prices. The 90 percent lean was at $133.80 last week, while the 50 percent trim traded at $44.64, up from $38.42 the previous week.

The sharply higher cash prices gave commodity traders reason to push live cattle contracts higher on the Chicago Mercantile Exchange (CME) at the close of the session last Thursday. Prices were 35 points to 247 points higher across the board. Up front contracts received the biggest boost. April 2007 live cattle contracts were the biggest gainers on the day, rising 247 points to settle at $101.02. June issues added 192 points, closing at $98.75, and August closed 177 points higher at $95.32.

Feeder cattle

Feeder cattle markets last week showed a sharp increase due to several factors. Many cattle buyers showed some optimism for spring grass and as a result, feeder cattle prices for thin steers and heifers ready to go to grass soared.

“The light end of the feeder calves is really up because we have conditions that are suggesting much of the U.S. will have green grass going into the spring,” said Jim Robb, director of Livestock Marketing and Information Center.

In addition to the optimistic outlook cattle buyers have for grass, the CME cash feeder cattle index rose to $100.48 last Thursday, up from $98.70 the previous week.
One of the biggest factors that resulted in increased feeder cattle prices was the huge increase in the cash and futures fed beef market. Feedlots are receiving more for fed cattle and can afford to pay more for feeders.

“The futures market for beef is really on fire this week,” said Robb, last Thursday. “The fed cattle market has really had a spark lit under it and has pulled the feeder cattle prices up.”

Fed cattle were trading an average of $98 last Thursday with some averages going as high $99 to $100 in the southeastern region of the U.S.

Interestingly, corn prices have only come down a little and have probably not had much of an effect on the market.

“Corn prices certainly haven’t come down enough to support the feeder cattle market and that’s a little strange,” he said. “With the corn coming down just a little, cattle buyers are turning a blind eye and focusing on the fed cattle increase.”

In auction market trade in Davenport, WA, feeder cattle sold from $1 to $4 higher. The trade was active with good demand. Five weight feeder steers called for $116 while their heifermates sold for $95.25. Fleshy, 700 lb. steers sold for $94 and heifers of similar type and weight sold for $89.

Torrington, WY, had more cattle consigned last week when compared to the previous week with 3,100 head. Steers and heifers were steady to $3 higher. The overall quality at the sale was attractive and the demand was moderate to good. Steers weighing 510 to 540 lbs. sold for an average of $140.25 and steers weighing 700 to 785 brought an average of $104.25. Five weight heifers sold for $110 while the heavier consignments, weighing 715 lbs., sold for $98.50.

Compared to the previous Wednesday, steer calves in La Junta, CO, under 500 lbs. sold for $3 to $5, and in some instances, $8 higher. Steers over 500 lbs. were steady to $1 higher. Yearling feeder heifers were $2 higher. One lot of fancy 435 lb. steers brought $149. Five weight heifers sold for $125 to $130 and yearling heifers of replacement quality sold for an average of $100.

In Amarillo, TX, feeder steers and heifers were mostly steady except heifers under 600 lbs. which were $1 to $3 higher. Steers averaging 530 lbs. sold for $117 and heavier weights of 713 lbs. sold for $103. Heifers weighing 539 lbs. sold for $100.75.

The auction market in Oklahoma City, OK, had a large sale last week with a run of more than 15,500 head compared to 11,685 the previous week. Feeder steers and heifers were mostly $1 to $3 higher last week. Demand was reportedly very good for such a large run. Some cattle were in thin to gaunt condition which was in the buyer’s favor. Demand was very good for thin cattle suitable for grass. Thin steers weighing 440 lbs. averaged $140 and thin five weights sold for an average of $134. Seven-hundred-fifty pound steers, also in thin condition, sold for $106. Nine weight steers sold for an average of $95.62. Five weight heifers sold for an average of $107.40 while their value added counterparts brought $109. Heifers weighing an average of 724 lbs. sold for $93.87.

Just north in Dodge City, KS, feeder steers and heifers weighing between 300 and 600 lbs. were steady to $3 higher. Steers weighing 600 to 650 lbs. steady to $1 higher and seven to ten weights were steady to $2 higher. Heifers weighing between 600 and 750 lbs. were steady to $4 higher and 750 to 900 lb. heifers were steady to $1 higher.

The state of Nebraska boasted over 16,000 head of cattle receipts last week. Steers trended $1 to $4 higher with some instances of $6 to $7 higher. Heifer offerings traded $2 to $4 higher. Demand in the state was very good and trading was moderate to active. Weigh-in conditions were definitely in the buyers' favor after cattle endured extremely frigid temperatures and adverse weather conditions the previous week. Steers weighing 500 lbs. sold for $127.56 while a lot of fancy steers at the same weight brought $139.75 and thin steers averaged $135.26. Steers averaging 807 lbs. sold for $100.67. Heifers averaging 524 lbs. averaged $109.89 and thin heifers weighing in at 506 lbs. called for $127. One lot of value-added heifers weighing 783 lbs. sold for $101.

In Ft. Pierre, SD, feeder steers and heifers calves under 700 lbs. sold steady to $2 higher with most improvement on cattle suitable for grass. Feeder steers over 700 lbs. sold $2 to $4 lower. Feeder heifers and heifer calves sold mostly steady. Demand was called moderate to good.