Feds begin summer slide
Fed cattle trade was active last Wednesday and Thursday in the northern Plains on moderate demand from packer buyers who were still moving heavy numbers of cattle through plants, despite slipping margins and rumor of cutbacks. Lackluster beef movement has kept beef cutout levels on the defensive for the past several weeks and last Thursday was no exception. During morning trade, Choice boxed beef slipped more than $2, to $150.51, and Select fell nearly $1, to $144.05. However, at those levels, there was some sign of renewed buying interest and 363 loads of fabricated cuts and grind were moved early in the day.
Those factors caused feedlot sellers to come to the table early last week and accept lower money for showlists. In Nebraska, live sales last Wednesday were $1-1.50 lower at $91-91.50 and dressed sales came in $2-3 lower at $144-145; in Colorado, live sales were mostly $1-2 lower at $91.50, with dressed trade $2 lower at $144-145; in the western Corn Belt, live sales traded 50 cents to $1 lower at $91.50-92 and dressed sales were reportedly $2-4 lower at $144-145. Trade and demand was light in Kansas last Wednesday. Dressed sales traded $2-3 lower at $144-145. Trading was inactive in the Texas Panhandle last Wednesday and not expected to develop until sometime late in the day last Thursday. The last established market in the Texas Panhandle live sales traded at $93. By mid-Thursday last week however, prices were still slipping for live cattle and the day’s sales were $1-2 behind the previous day.
Slaughter volume for the week was still relatively robust as packers continued to take advantage of positive margins, which were estimated by HedgersEdge.com at $6.75 per head. Harvest last Thursday was estimated by USDA at 128,000 head, even with week ago and year ago numbers. For the week through last Thursday, packers had slaughtered 507,000 head. That figure was well above last week’s holiday shortened week-to-date total of just 386,000 head, but below year ago totals of 509,000 head.
The retail demand for Choice cattle and the seasonal slump in the number of cattle hitting that quality level has added some support to the market, however, the temporary loss of the Korean export market hurt clearance of some end meats like the chuck and forced more product onto an already heavy supply flowing into the market. There is still some support from advanced buying for Father’s Day, however, once that is wrapped up, look for additional weakness in the boxed beef market which, in turn, will trigger an additional slide in the fed cattle market toward the coming summer low.
If feedlots fail to reach good clearance levels, the current marketing state could evaporate quickly, removing one of the few remaining bargaining chips available for cattle feeders. Competing proteins are also going to impact the beef market. The poultry industry is increasing egg sets and pork continues to be very competitive in price. The values to be found in both those markets are making the competition look very attractive for consumers, particularly those who are already struggling with this year’s record-high fuel prices.
The cash market slide last week spilled over into the commodity trading on the Chicago Mercantile Exchange (CME). Live cattle contracts last Thursday settled lower on the up front months as a result of the day’s lower cash trade. June lost 32 points, falling below the $90 mark, closing at $89.67. Meanwhile, August shed 20 points, closing at $89.52 and October fell 32 points, ending the session at $93.45. Deferred months were mostly positive at the end of the day last Thursday, with December moving slightly higher to close at $94.72 and February and April 2008 tacked on gains, closing at $96 and $96.50 respectively.
In the CME feeder cattle pit last Thursday, contract traders followed the lead of the live trade lower. Contracts were down across the board for the day. August lost 92 points, closing at $108.85, while September fell 70 points, closing at $108.75. October was down 75 points at the close of business at $108.70 and November lost 72 points, closing at $108.57.
For the most part, feeder cattle trade appears to be ignoring the wild weather market swings in corn trade and is trading in a relatively narrow range ahead of fall contracting. Prices in the past several days appear to be running at levels near last year as a result of the tight supply. Herd building in the second half of this year will increase heifer retention and cut farther into the available supply, meaning that feedlots will have to come to the table to meet offers from cow/calf country.
Cash trade in the country last week remained steady with the previous week. The CME cash index at midweek last week hovered at $107.64, down slightly from the prior week.
Corn prices through the summer will continue to fluctuate with the changing weather, however, it seems that feeder cattle buyers are able to block that influence and have been staying the course, a trend which appears to be in place for the next couple of months now that the bulk of the runs have fallen off.
In Oklahoma City, OK, the largest run of cattle reported last week brought prices mostly steady for cattle over 800 lbs., while those in the 600-800 lb. range were called steady to $1 lower. The limited supply of light calves sold steady, while 500-650 lb. stockers were not well tested, although there was a lower undertone noted. Demand was reported to be moderate to good for all classes, although the overall kind and conditions were not as attractive to buyers, with several Brahman influenced and number two muscled cattle in the mix, along with a number of cattle being shipped in from outside the area.
In Joplin, MO, compared to two weeks prior, steer and heifer calves sold steady to $2 lower, while yearlings were steady. Demand was reported to be moderate on a moderate to heavy supply. A combination of no sale last week and rain across the four-state area contributed to the heavier receipts at the sale.
Farther north and west, feeder cattle trends were difficult to call as a result of the light runs of cattle, however, most markets reported steady to firm prices on offered lots with strong buyer demand. Precipitation in the region continues to promote good grass growth and grass cattle are in high demand. In Billings, MT, feeder cattle offerings were also very limited again last week, with too few offered to fully establish the market. Demand remains good for stockers and feeders.
In Clovis, NM, last week, feeder steers and heifers sold unevenly steady, however, the Holstein special sale saw prices for offerings steady to as much as $3 higher. Trade was called active with good demand at the sale.
In Salina, UT, feeder steers of mixed weights under 350 lbs. were $8-10 lower. Those in a wide range of 350-550 lbs. were called $1-2 higher, while weights over 550 lbs. were $2-3 higher. Feeder heifers were mixed but mostly weak to $1 lower, with some instances of $3 lower, while Holstein steers were weak to $1 lower.