Softer beef adds pressure to feds

Cattle Market & Farm Reports, Editorials
Jun 20, 2005
by WLJ
— Market declines $2-3; feeder cattle follow.
Last week’s developments surrounding a possible second case of BSE in the U.S. and the continued softness in the boxed beef market combined to result in a $2-3 softer fed cattle market last week. That decline trickled down to the calf and feeder cattle markets, also to the tune of about $2-3. The only fed cattle trade reported through Thursday was in northern feeding areas at mostly $83 live, $132-133 dressed. Analysts said volumes were “moderate at best,” with Nebraska probably moving 75,000 head, and Iowa moving under 20,000 head. Colorado trade was minimal at mostly $82 live, $131-133 dressed, sources said. Kansas and Texas cattle feeders were still trying to hold out for as much money as possible Thursday, with asking prices still at $87. Packers were seen bidding mostly $83. “Friday trade is pretty much expected,” said Brent Snyder, analyst with the Texas Cattle Feeders Association. “Softer trade will probably happen, but the question is how much softer.” Cattle futures were down significantly three of the first four days last week, with the only glimmer of hope being a Tuesday turnaround. However, that hope didn’t last too long, as most contracts lost over $1.50 between Wednesday and Thursday. At close of business Thursday, June live cattle were at $81.20, down 70 points from Wednesday; August settled down 77 points, at $79.42; and October closed at $82.05, a 70-point decline. Packer margins were barely hovering around breakevens last week, as boxed beef prices continued to slide, particularly Choice product. As of midday Thursday, Choice boxed beef was reported at $138.74, down over $4 from the close of business the previous Friday. Select was at $133.82, down about $2.50 from the end of the previous week. Thursday’s Choice/Select spread of $4.92 was about $2 narrower than most of the prior week. “We are really starting to see a large influx of cattle that are coming in too heavy with too much condition on them,” said Reed Marquotte, analyst with M&Z Livestock Analytics. “Compared to the past few years, the narrowing of the Choice/Select spread is several weeks premature and does nothing but add more concern about the market come late July and August.” Finishing weights continue to be a concern, also. Through Thursday, average fed steer finishing weights were still over 1,300 pounds, more than 30 pounds heavier than a year ago. The weights were slightly below the previous week, however, analysts said the fact that weights are still over 1,300 pounds is very threatening to fed cattle prices over the next few weeks. In addition, slaughter volumes continue to run ahead of most analysts’ projections for meeting consumer beef demand. For the week ending June 11, 659,000 head of cattle were processed. Projections for last week’s slaughter volume were at least 660,000 head; between last Monday and Thursday, 486,000 head were processed, 5,000 head more than the same period a week earlier. Most analysts still said that processing approximately 610,000 head of cattle would meet, possibly exceed, current beef demand, both domestic and exports. Boxed beef volumes were mostly moderate last week, after the previous week showed several 500- plus load days. There was some hope that retail beef demand would be strong for the Father’s Day weekend, however, analysts said previous holiday weekends have been lackluster for beef movement and consumption.
Decline trickles down
Very few, if any, cattle feeders were said to be making money on last week’s market. Most market analysts indicated that breakevens for cattle sold in northern feeding areas were around $85, while Kansas and Texas cattle feeders were probably figuring $87-88, at least. As a result, a significant decline was seen in the calf and feeder cattle markets last week. The biggest slide was shown in the heaviest weight ranges of yearling and other feedlot-ready cattle. In some instances those cattle lost $4-5, compared to two weeks ago. Most other classes of cattle were down around $3 per cwt. In some cases, cattle sold last week may be losing upwards of $75-100 per head. Heavier feeder cattle right now are more likely to be ready for market when there is an overly large supply of cattle already looming, said Marquotte. “Front-end supplies are already pressuring the market, and the way things look, things aren’t going to change anytime soon,” he said. The CME feeder cattle index, for 600-850 pound steers, was $111.83 last Wednesday, compared to $114.42 the previous week. Calf prices were a “trickle-down” victim of price declines in the other cattle markets. Most analysts said that unseasonably good grazing conditions and small offerings were very conducive to keeping prices at least steady under “normal” conditions. “But, we are far from normal conditions,” Marquotte said. “We start seeing losses in the fed market likewe are right now, and it affects all others in the industry.” — WLJ
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