Fed trade stagnant

Cattle Market & Farm Reports, Editorials
Jul 10, 2006
by WLJ
Fed cattle trade was at a standstill last Thursday with packers and feeders several dollars between asking and offer prices. Thursday afternoon, $5 split the two.

Jim Gill at Texas Cattle Feeders Association said he didn’t expect trade to develop until late Friday.

“We haven’t seen a trade one. People are going to be asking $85-86 and packers will be offering $81, is my guess. I think we stand a good chance of getting $85,” said Gill.

Most analysts last week were calling for mostly steady trade, when it finally developed.

Retail movement was light to moderate leaving packers with plenty of supply and not enough demand to continue paying the feedlots’ asking prices on a short kill week. With this said, one can assume with validity that warehouses are packed full of beef, adding to an existing plentiful supply with a steady to sluggish demand.

USDA estimated last week’s slaughter number at 375,000 head Thursday. This number is down significantly from the week prior’s 497,000 head and up from last year’s 359,000 head as a result of the Fourth of July holiday. Last Thursday, 125,000 were slaughtered, which was dead-even with a week earlier, but 7,000 head more than 2005.

With light retail demand Thursday afternoon, boxed beef prices also took a downward trend. Choice cutout was at $153.29, down 91 cents. Select cutout values dropped 33 cents to $131.33. Although boxed beef was down, retail trade is still stronger than a year ago and looks to maintain good support on moderate demand.

According to Darrell Mark, economist at the University of Nebraska in Lincoln, the question now becomes what hap-pens to demand after the holiday break.

“We can expect to see some fill-in business after the holiday as weather looked to be conducive for grilling over the weekend. This should help support beef values for the rest of the week,” said Mark. “However, business that has been transacted on a forward basis has taken place at lower money.”

Carcass weights are still running approximately 14 lbs. above year ago levels and along with this is an expected increase in Choice grading cattle in the weeks ahead. This, along with an expected seasonal decrease in demand for middle meats, will likely begin to weigh on cutout values as next week progresses, according to Mark. “As of right now, we would not expect beef values to crash and burn, however, a pull back into the lower to mid $140s would seem very reasonable basis the Choice cutout,” he said.

End meats should hold together better than middles as, seasonally, buyers turn to these items as lower priced alternatives to more expensive cuts in late summer and into the fall. A resumption of Asian beef trade is also expected to lend support to round and chuck values as China opens their borders and Japan prepares to do so by the end of this month. Mark said to look for boxed beef market values to soften further early next week.

Last week’s Chicago Mercantile Exchange trade was volatile, trading lower. On Thursday last week, August contracts traded 90 points down, closing at $85.95. October fell 58 points to close at $89.88. December contracts dropped 48 points, settling at $90.25.

Feeder cattle

Auction markets remained strong across the country for the most part. However, due to the holiday, little auction trade circulated as most livestock markets were closed. The two largest, Joplin, MO, and Oklahoma City, OK, closed their doors to honor Independence Day.

Last Monday in Woodward, OK, a solid run of feeder steers averaged $1-2 higher. Feeder heifers were $2-4 higher, with instances of 850 to 900 lb. heifers selling $6 higher. Steer calves sold $2-3 higher, while heifers sold $4 up. Demand was described as very good for all classes.

In Sioux Falls, SD, Thursday, a little over 400 head sold. Compared to last week, feeder steers over 975 lbs. sold steady to $2 higher with the greatest advance over 1,100 lbs. Buyer demand was called good.

In Nebraska markets last week, 6,525 head sold. These numbers included Bassett Livestock Auction, Bassett, NE, Huss Livestock Market LLC, Kearney, NE, and Loup City Commission Co, Loup City, NE. Compared to the previous week, steers under 800 lbs. sold steady to $2 higher and over 800 lbs. sold $3-5 higher. Heifers under 700 lbs. sold $3-5 higher and over 700 lbs. sold $1-2 higher. The bulk of the trade consisted of average to good quality yearlings off of short summer grass. Demand was described as good to very good for all classes and weight ranges.

The auctions maintaining the upward trend certainly served as no representative for the futures market. Midday trading last Thursday showed an upward pattern, but that quickly changed with contracts in all months dragging lower before the close. August contracts traded $1.20 lower to close at $116.05, down from Wednesday’s $117.25. Downward was September trading, slumping $1.11 to settle at $115.75. October lacked 73 points from the day prior’s trade, closing Thursday at $114.83. November closed $1.20 lower. — WLJ