Cattle continue trend toward seasonal low
Trading and demand was moderate in the northern Plains and western Corn Belt by Wednesday last week. Trade and demand was reported in Kansas late Wednesday and Thursday. Compared to last week, Nebraska live sales traded $1-2.50 lower at $89 and dressed sales $4 lower at $140-141. Colorado live sales were reported $2-2.50 lower at $89 and dressed sales $4-5 lower at $139-140. In Kansas, early live sales last Wednesday traded mostly $2 lower at $89 and dressed sales traded $2-3 lower at $141. Texas trade last Thursday was reported at $90-90.50. Clearance levels were reportedly good, with most analysts calling the fed cattle trade complete for the week by mid-day last Thursday.
Fed cattle prices continue to trend toward the seasonal low and boxed beef prices are contributing heavily to the slide, said Livestock Marketing Information Center Director Jim Robb.
“We haven’t seen very good boxed beef movement since prior to Memorial Day. That’s resulted in additional pressure on fed cattle prices recently,” he said. “We expect that the industry might reach the seasonal low in late June or early July at the rate it’s going.”
Last week, the boxed beef market continued to slide lower, however, it appeared to be reaching a price level that was promoting some movement. Thursday trade on the Choice boxed beef was down $1.47, to $146.11, while Select dropped 76 cents to trade at $139.94. Movement for the day, at 461 loads of fab and grind product, was called moderate on heavy offerings as packers tried to spur buying interest. Robb noted that demand for middle meats has been lackluster so far this year, particularly when compared with the same time period last year. That decline in consumer demand has been a significant drag on the cutout and a hand-to-mouth buying pattern at the wholesale level.
“Packers have been less than willing to forward price beef until recently, particularly against the June live cattle, which was in the $96 range until just a few weeks ago,” he said. “We are starting to see an increased interest in buying now that the fed cattle market has ratcheted down some. The next two weeks will be very indicative of where the market is headed.”
Robb said he expects some packers to begin cutting back harvest levels in an effort to support the cutout prices from sliding too much farther. Last week’s tally through Thursday was still running relatively high at 508,000 head, compared with 507,000 the prior week and 503,000 head for the same period in 2006.
Although the market has softened faster than many analysts had expected, Robb said most economists aren’t ready to blame the trend on rising consumer prices, particularly fuel costs.
“Middle meats are softer, in part, because there been some trading down in the meat complex and that has been supportive of the trim markets, despite heavy cow slaughter this year. Buyers are trading down from middle meats to hamburger.”
He also noted that reports from restauranteurs are also adding some uncertainty to the beef market.
“If you look at the results from the restaurant chains and talk to the restauranteurs, the reports aren’t looking very good right now. Nearly all of them are reporting same store results below year ago levels,” Robb said. “That drop has also led to a lack of buying interest from that sector, which is also a drag on the market.”
However, despite sliding prices, Robb said feedlot closeouts have been particularly good for cattle feeders since early spring, with per head profits reaching as high as $150 per hedged steer during certain weeks.
“Guys that were hedged on both their cattle and corn are looking pretty smart right now,” Robb said. “Even cash to cash feeders during the March to May time period were profitable by $54-67 per head.”
The fall hedging opportunities for fed cattle have evaporated and Robb said September closeouts are projected in the range of $97. However, feed costs could take their toll as the corn market has been subject to wild swings as weather forecasts change. But, Robb said he expects it will take some serious deterioration in crop conditions to keep Omaha cash corn prices at the $4 level.
The positive margins being seen in feedlots have translated into some strong prices being paid for feeder cattle for fall delivery. Last week’s first big video feeder cattle auction featured more than 100,000 head from 28 states. According to market reports from Superior Livestock Auction’s Council Bluffs, IA, sale, demand was excellent on all classes of cattle. Yearling steers were called steady to $2 higher with heifermates bringing steady prices. The lighter weights brought prices $1-3 lower. Northern calves were called steady to $2 higher, while southern calves sold steady on the better kinds, while average brought prices $1-3 lower. Some examples from the sale include a weighted average price of $109.11 for 435 head of yearlings in the 800-840 lb. class, while 320 head of cattle in the 900-925 lb. range brought an average of $104.10. Meanwhile in the lighter weights, 190 head of steers in the 610-640 lb. class sold for an average price of $111.54 and 400 head of 485 lb. steers brought a weighted average of $137.44.
Elsewhere, runs of cattle in much of the country remain light, with good pasture conditions being reported in much of the west, Plains, and Midwest. The two notable exceptions are the southeastern U.S. and California. Last week’s pasture and range condition report for California showed pasture and range conditions rated at 95 percent poor to very poor. Much of central California never received the needed spring rains and there are reports of a good deal of supplemental feeding in the area.
In the southeast, some much needed rain fell two weeks ago after a tropical depression from off the Florida coast moved inland. However, pasture conditions there have improved little, with 70 percent of pasture rated at 70 percent poor or very poor. To the north in Georgia, 74 percent of grazing land was rated 74 percent poor or very poor. Those conditions have led to early sales of feeder cattle as well as heavy culling in many cow herds. Because conditions in much of the region are poor, a good number of those cattle have been showing up far from home, with producers opting to pay trucking costs to places like Oklahoma City, OK, where grass is more readily available. At Oklahoma City last week, where good rains have prompted a solid market for stocker cattle, prices paid for feeder cattle and calves were mostly steady to $2 higher last week.
Joplin, MO, also added to the rainfall total last week. Prices at the sale were $1-3 lower for steers, while heifers sold steady to $1 lower on moderate supply.
Meanwhile, in Hub City, SD, load lots of quality feeder steers and heifers were called steady last week, while the remainder sold $1-2 lower than the prior week.
In Riverton, WY, as in much of the rest of the West, price trends were in short supply last week, although the few offered feeder cattle brought prices mostly steady with higher undertones noted in most markets with good demand for most classes of cattle on consignment.