Fed trade steady to $1 lower

Cattle Market & Farm Reports, Editorials
Dec 20, 2007
by WLJ
Trade was slow getting started last week, despite expectations that short-bought packers would come out early to fill demand. As of last Thursday, however, there was only light trade reported in Nebraska and western Iowa at $98 live and $154-156 dressed, although there was not enough volume to call a trend for the week. Offers remained at the $100 mark for live cattle. In the beef, feedlots were asking $158-160 for their show lists. Most analysts were expecting cattle to trade steady to $1 lower than the prior week at $97-98 live and $155-157 dressed basis.

The USDA’s monthly cattle on feed report was expected to show an uptick in the number of cattle placed in feedlots for the second consecutive month. That news is likely to have little impact on the near-term market picture which remains positive for cattle feeders.

 Tight front-end ready supplies and a short-fall in Choice product has led to fed cattle prices which remain well above year-ago levels. Although the cattle which suffer the impact of severe winter storms are mostly moved through the production chain, there are not enough Choice grading cattle available to fill improving demand ahead of the summer grilling season. Cattle feeders are also pulling cattle forward in an effort to capitalize on the current price level, which has added to the situation. So long as feedlots are able to maintain their current marketing situation, the picture should remain positive for the next six weeks or so. After that, increases in available cattle should ease some, perhaps moving prices lower as indicated by the current contract prices on the Chicago Mercantile Exchange (CME). Looking even farther ahead, cow slaughter remains well ahead of normal and heifer retention levels have failed to increase as expected. According to Glenn Grimes and Ron Plain at the University of Missouri, as of the week ending March 24, total cow slaughter was up 15.1 percent from a year ago. Beef cow slaughter was up 17.1 percent from 12 months earlier and the slaughter rate has increased as producers move into spring.

“For the four-week period ending March 24, total cow slaughter was up 19.4 percent, dairy cow slaughter was up 14.6 percent and beef cow slaughter was up a whopping 24.9 percent from the same four weeks last year,” they said. “There is no question that the expansion made in the cattle herd a year ago has stopped in 2007.”

Beef cut-out values continued their pull-back from the prior week’s highs. Heavy offerings of boxed beef from packers have swamped demand, pushing prices lower. Last Thursday, Choice cuts were down $2.32 in morning trade to $164.93. Select dropped $1.53, to trade at $153.45 during the day. There was expected to be more downward price pressure as packers continued to harvest cattle at levels higher than week-ago or year-ago rates. As of last Thursday, the week to date harvest was estimated by USDA at 495,000. That figure was 20,000 more than the prior week and well ahead of the same period in 2006 when packers slaughtered 476,000 head. Analysts said last week that the cutout value would require additional movement downward before packers would be able to move the significant quantity of product piling up in cold storage warehouses. Consumer demand will need to improve as well if packers hope to continue the just slightly positive margins they were enjoying last week. With warmer weather predicted for much of the nation in
the week ahead, consumers may begin breaking out the grills, spurring retail product movement and higher cutout values.

Price movement on CME last week was mostly downward. Some early week across the board gains on Monday and Tuesday erased some of the prior week’s losses, however, Wednesday and Thursday, the contract trade turned lower with more across the board losses. In last Thursday’s session, April live cattle contracts shed 67 points, closing at $96.45, while June contracts gave up 10 points to close the day at $92.72. August and October contracts were down 27 and 25 points to close at $90.82 and $94.67 respectively.

Feeder cattle

Prices for feeder cattle varied regionally last week. In spite of the CME index falling to close at $109.22 last Thursday, many of the western states reported increased feeder prices. However, in some western states with large sales, such as Oklahoma and Missouri, cattle prices softened.

“There are several reasons why prices went down last week,” said Mark Harmon from Joplin Regional Stockyards. “We’re still running pretty heavy. We are selling a lot of cattle.”
Harmon said some of the reasons for the decreased prices were large runs, poor weather, late frost, and the substantial number of new crop cattle among last week’s offerings.
“The new croppers are starting to run and that brings the averages down,” he said.

Cattle referred to as new croppers are cattle that come into the auction market with extra flesh. Most of them are newly weaned and have had few, if any, shots.

“You can still sell a grazer awfully good but if they’re new croppers, they’re just not going to sell as well,” said Harmon. “These calves are just not ready to be turned out on grass, packing all that fat. Cattle buyers are still looking for thin cattle ready to go to grass.”
He continued to say, “Yearlings are still selling well and the heifer thing is a little better than it has been.”

Harmon also said that the area has had a hard winter, as have many of the western states. Recent storms across Oklahoma, the panhandle of Texas, and even in the state of Missouri, have caused many problems for farmers and ranchers.

“We’ve had a hard winter and there was a bad freeze Saturday (Apr. 14),” said Harmon. “Any corn that was planted is gone and the wheat, which had already come up, is broken. Weather has definitely been a factor in our feeder cattle markets.”

Cattle that are ready to go to grass and in thin condition are still in high demand across the western states. In spite of recent winter storms, increased cash and future corn prices, and the decrease in the CME index, producers and cattle buyers remain optimistic about spring grasses.

With over 1,200 receipts in Davenport, WA, last week, feeder cattle sold steady to $3 higher. There was active trade and good demand at the sale. Steers averaging between 400 and 500 lbs. sold between $115 and $122 and heavier steers weighing between 700 and 800 lbs. were worth $102. Five and six weight heifers sold between $100.50 and $105 while those weighing in between 700 and 800 lbs. were worth $93.50 to $95.50.

To the east in Fargo, ND, lighter steers weighing under 650 lbs. sold $1 higher when compared to the previous week. Heavier steers weighing 650 to 950 lbs. were $2 to $3 lower. Feeder heifers sold unevenly steady. There was good demand, especially for lighter weight cattle. Steers averaging 525 lbs. were worth an average of $119.91. One lot of 750 lb. thin steers called for $106.75. Another lot of heifers averaging 582 lbs. sold for $107.74 and females weighing 807 lbs. were worth an average of $93.19.

In Riverton, WY, feeder steers under 500 lbs., higher undertones were noted on a light offering and those over 550 lbs. remained steady. Steers weighing 650 to 750 lbs. sold $4 to $5 higher. Feeder heifers were unevenly steady with lower undertones for those under 550 lbs. Heifers weighing between 645 and 690 lbs. were $3 to $5 higher. Demand was good and trade was active. One package of steers averaging 533 lbs. sold for $135. Heavier steer calves weighing between 715 and 755 lbs. sold between $105 and $110. Heifers weighing between 510 and 595 lbs. called between $105 and $114. A set of heavier females, of replacement quality, averaging 810 lbs., sold for an average of $98.
East of Wyoming in McCook, NE, steers and heifers sold steady to $3 higher. The higher prices were on the heavier cattle. One set of steers, averaging 520 lbs., sold for an average of $134.16. Almost 200 head of steers averaging 723 lbs. called for an average of $115.69. Five weight heifers averaged $119.43, with the heavier females, averaging 783 lbs., selling for $101.82.

In Salina, KS, feeder steers weighing between 400 and 550 lbs. were lower with fleshy unweaned calves hard to move. Steers weighing 550 to 700 lbs. were steady and those weighing between 700 and 1,000 lbs. were $2 to $3 lower. Feeder heifers weighing 350 to 550 lbs. were $1 lower, 550 to 700 lbs. remained steady, and 700 to 800 lbs. were $2 lower. Steers averaging 475 lbs. sold for an average of $130.54 and their heifermates called for an average of $129.12. Heavier steers averaging 825 lbs. were worth $103.50 and heifers of a similar weight sold for $102.

Over 9,500 head were sold in Oklahoma City, OK, last week. Feeder cattle and calves were $3 to $5 lower. Demand was moderate, at best, for all classes. Muddy conditions in the region affected demand. Also, the recent losses in CME futures has placed pressure on the prices. One set of 475 lb. fleshy calves sold for $130. Slightly bigger steers that were thinner in type, weighing 527 lbs., sold for $137. Steers averaging 634 lbs. sold for $119.85. Another set of heifers averaging 431 lbs. were worth $118, while fleshy heifers averaging the same weight sold for only $113. One lot of replacement quality females averaging 825 lbs. called for $94.

Further to the east in Joplin, MO, 6,500 head of cattle were sold last week. Steers and heifers under 600 lbs. were $2 to $5 lower with most of the decline on new crop calves. Calves over 600 lbs. remained steady. Demand was moderate for thin grazing calves and feeders and moderate to light on new crop calves. Steers weighing between 500 and 600 lbs. sold between $114 and $126 and thin steers at the same weight were worth $121 to $131. Heavier steers weighing between 700 and 800 lbs. sold for $100 to $109. Heifers that weighed an average of 550 lbs. averaged $106.75 and thin females at the same weight called between $102 and $114.

South in Dalhart, TX, feeder steers under 600 lbs. remained steady and those over 600 lbs. and all feeder heifers were firm to $1 higher. Trade was active and demand was good. One package of steers weighing 417 lbs. sold for $150. Steers weighing between 600 and 700 lbs. averaged $115. Heifers weighing between 500 and 600 lbs. called for $122.50 and seven weights averaged $106.25.