Beef demand pulls feds $2 lower
After a couple weeks of steady prices, feedlots nationwide were starting to feel the pressure and traded cattle $1-2 lower than the prior week.
Through last Thursday, northern Plains cattle feeders sold 55-60,000 head at mostly $127 dressed. Southern Plains and Southwest feedlots finally pulled the trigger Thursday afternoon at $80-80.50 live, compared to mostly $82 the previous week. Texas feeders sold 35-40,000 head, while Kansas trade totaled 45-50,000 cattle.
Beef demand was significantly softer the week after the Fourth of July weekend, which was considered strong for beef sales. Retail sources were skeptical whether it would pick up until Labor Day weekend in early September. However, retailers have several big beef features scheduled for the second half of July.
Andy Gottschalk, analyst with HedgersEdge.com, said that the current struggle in the market is seasonal and that market pressure has been exacerbated because of weaker-than-normal beef demand.
“There’s definitely a demand problem when packers are losing money at these slaughter levels. This time of year, packers generally are well into good margins, earning $30-50 per head, and now they’re losing $7.50 per head.”
Boxed beef movement last week was very strong, however, prices were declining as packers were trying to clear inventory. The choice boxed beef index was at $132.99 midday Thursday, compared to $135.14 at the beginning of the week. Select product was down to $128.81 Thursday, compared to $131.22 Monday. Three of the first four days of last week saw well over 450 loads move, with one 600-plus day noted among them.
Gottschalk said the beef movement last week could be positive for the cattle market later this month or early August when beef featuring at the retail level is expected to resume.
Cattle slaughter picked up last week, but that was following a holiday shortened week. Through Thursday 487,000 head were processed, compared to 500,000 during the same time frame last year. Analysts were still speculating that weekly slaughter could end up over 625,000 head, which is still more than what is needed to meet current beef demand, both domestic and export. For the week ending July 2, 652,000 head were processed, about 30,000 head more than current beef demand.
Finishing weights of fed cattle continue to escalate, and that is adding to beef supply pressure. The average weight of all cattle processed for the week ending July 2 was 1,249 pounds, compared to 1,245 the week prior and 1,236 a year ago. Carcass weights were at 767 pounds, compared to 764 the previous week and 761 last year.
The USDA reported last Thursday that fed steer live weights averaged 1,322 pounds live, and 841 pounds dressed, compared to 1,266 and 837 pounds two weeks ago.
“The holiday shortened week left a lot of ready cattle in feedlots, those cattle were fed an extra week and are now coming out at a very heavy weight, thus hurting the market,” said Reed Marquotte, M&Z Livestock Analytics. “A 1,275-pound steer that missed the packing house because of Fourth of July, probably tipped the scales between 1,300-1,310 pounds, which is a lot of extra weight, when beef demand is already slumping.”
Gottschalk added that the weight jump can be attributed to three things—high replacement cattle costs, cheap feed costs and high breakevens on cattle currently being fed.
“Feeders feel it is cheaper to feed cattle currently in the lot right now, instead of buying a replacement animal and feeding it,” he said.
Losses of $100-plus on a lot of fed cattle last week started to weigh on feeder cattle prices. Across the country, heavy weight cattle were bringing $2-4 less than the previous few weeks.
In addition to cattle feeders losing money, prospects for beef trade with the Pacific Rim appeared to be delayed even further to very late this year or early 2006. As a result, cattle feeders need fewer cattle to meet marketing slots in the fall and winter, analysts said.
The CME feeder cattle index for 600-850 pound steers was around $113 last Wednesday, compared to $116-plus the previous week.
Calf prices last week were very mixed with a wide range of prices reported even within the same weight divisions. Steers ranged between slightly softer to slightly firmer, while higher quality heifers were $3-5 stronger. The best demand was from stocker operators on replacement type females that were bought to go back on grass, and sold next winter.
Superior Video Auction’s “Week in the Rockies” sale July 5-9, offered over 250,000 head during the five-day event. There were several instances where 400- to 500-pound steers brought $155 or more. There were also instances of 500- to 600-pound heifers bringing $145 or more. Some of the highlights at Superior’s sale were: a set of 450 lb. certified Natural Angus steers for $154, October or November delivery; Barbara Jolly & Sons, Kit Carson, CO, sold a set of 465 black and red Angus certified natural steers for $157 for October delivery; Dragging Y Cattle Co., Dillon, MT, topped the sale with a set of 425 lb. Charolais and Angus sired steer calves, VAC 45 and VASE, for $165; the top yearlings were some 850 lb. Red Angus and Red Angus cross steers from Lonnie Frimann, Minatare, NE, that sold for $113.10; and some 935 lb. steers for $108.85, for August delivery.
Western Video Auction also held one of its special sales in Reno, NV, offering over 187,000 head. Some of the highlights from that sale were: a split load of 55 steers weighing 485 lbs. and heifer mates at 470 lbs. from Corder Farms, Ft. Benton, MT, that sold for $131.50 and $126.50, respectively; 83 black steers weighting 600 lbs. from Boone and Crockett Ranch, DuPuyer, MT, that sold for $120; 90 head of heifers weighing 650 lbs from L. Johnson, Great Falls, MT, that sold for $126.50 cwt; 250 Angus-Charolais cross steers, weighing 580 lbs. from Yribarren Ranch, Bishop, CA, that sold for $120.85.
On the steer side, a $6-8 premium is being paid for those cattle that are sold with a preconditioning program behind them, are certified as being “naturally raised,” or have been fitted with some sort of source verification mechanism.
Superior did sell a group of 420-pound steers for $168 per cwt, and another group of 450-pounders for $162.50. However, for the most part, prices on steer calves were called mostly steady. – WLJ
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