Fed trade steady
— Yearlings slump on fed losses.
— Calves up on rain.
Fed cattle gained $1 in the northern Plains dressed markets and were mostly steady on the live trade in southern feeding states last week. Most live trade was at $85, while dressed sales were at $135 on moderate trade. Just over 108,000 head traded through Thursday afternoon.
The fundamentals of the market would normally signal packers to speed up their processing lines, particularly with the Packer Margin Index at a positive $12.30 per head. However, processors are keeping slaughter rates at cautious levels. Packers cleared their beef inventory two weeks ago and forced the Choice cutout down to $144, but were unable to raise the cutout last week with reduced beef production.
Through Thursday, 484,000 head passed through packing plants, 27,000 head lower than the same week a year ago. Slaughter levels for the Memorial Day week were 568,000 head, 10,000 lower than the same week last year. Year-to-date beef production is 2.6 percent below a year ago, and the number of cattle slaughtered is down 4.3 percent from last year.
Carcass weights are starting to play a larger role in total beef production and southern Plains live steer weights are at 1,197 pounds; a year earlier they were 1,177 pounds. There is no denying that cattle are being held over. Average steer carcass weights were 793 pounds last week, compared to 780 pounds for the same week last year.
Cow slaughter is also down significantly. Ron Plain, extension livestock economist at the University of Missouri, pointed out that cow slaughter continues to run below a year earlier. For the year, through the week ending May 21, total cow slaughter was down 5.5 percent from last year. Dairy cow slaughter was down five percent, and beef cow slaughter was down 6.4 percent.
This reduction in cow slaughter is on top of an 11 percent decrease for the same period in 2004, compared to 2003. This reduced slaughter of cows along with replacement cow prices is very strong evidence that cow-calf producers are rebuilding the breeding herd.
The cow beef markets have been mixed over the past few weeks. The cow beef cutout is now down to $118.68, but was at $126 two weeks ago. The 90 percent lean was up a couple of dollars to $146.10 and the price of 50 percent trim is $82.11, still a strong market for this class of grinding product. Cow beef carcass values are at $83.
Feedlot-ready cattle were bringing mostly $1-2 under prices paid the previous week, as cattle feeders continue to struggle to make profits on cattle being marketed right now. In addition, delays in getting beef trade resolutions with Japan and South Korea don’t have market analysts very optimistic about the late summer, early fall fed market.
Southern cattle market sources reported breakevens at mostly $87-88, compared to prices of $85 or less actually received during the previous few weeks. That figures out to a $20-30 per head loss on cattle being marketed right now. Northern state breakevens are closer to $85. However, that still means it’s a “fifty-fifty” proposition when it comes to making a profit, according to analysts.
In addition, Jim Robb, chief analyst at the Livestock Marketing Information Center (LMIC), said that breakevens on placeement-ready cattle bought throughout May and early June are already projected at $90, while fed cattle prospects aren’t forecast to be that bullish when those cattle are ready to market.
“They (breakevens) could even go a few dollars higher,” Robb said.
The Chicago Mercantile Exchange (CME) feeder cattle index, jumped over $3 on June 3, up to $114.37. However, that was in part due to CME changing its formula for that data to include a wider range of cattle, from 600 to 850 pounds. Previously, the weight range was 700-850 pounds. CME statisticians last week told WLJ that the old CME formula, for last Wednesday, was around $108.50, compared to $110.77 the previous week.
Lighter weight calves were still showing a lot of strength, as a majority of northern tier auction barns were reporting $2-5 gains, while southern facilities were reporting prices steady to $2 higher.
Abnormally heavy moisture continues to inundate northern and central Plains states and a large portion of the West. That has resulted in continued improvement in pasture and range conditions. In fact, USDA reported nine of the 17 most western states having 70 percent of their pasture and range in good or excellent condition, and another four having at least half of available grazing lands in those categories.
Ironically, a couple states with the poorest range conditions in that area were Texas and Oklahoma, where producers are starting to report severe drying of pasture and rangeland soils due to high winds accompanying hot temperatures. In those areas, price gains for stocker cattle and calves were harder to find than in more northern areas of the country.
Extension livestock specialists from the Dakotas, Nebraska, northern Kansas, Colorado, Wyoming, Utah, Nevada and Idaho all indicated that stocking rates this spring and summer are 150-200 percent compared to the previous three-year average. That is leading to more demand for stocker cattle and calves.
In addition, northern state feedlots are more current than southern state lots, and they are in need of more cattle than their southern counterparts, officials said.
Demand was also helped because few cattle were available during the previous week due to the Memorial Day holiday, and all the prospective buyers from that week were joining other potential suitors for cattle last week. — WLJ
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