Cutout pulls feds lower

Cattle Market & Farm Reports, Editorials
Jul 24, 2006
by WLJ
Fed cattle trade was slow to start and the standoff was apparent with packers offering $78 against feeder offers of $83-84 live, and $130 dressed. There was some limited trade at $81-81.50 and $126-128 dressed, but not enough volume to call the market.

Boxed beef cutouts have been in a tailspin the past two weeks and wholesale buying interest emerged only when prices fell to a more attractive level of $144 on Choice products. Packer margins fell into negative territory for the first time this summer at a minus $4.80 a head. Even though packers are familiar with this arrangement, it didn’t appear that they were going to give in much. Trade was expected to resume at the $79-80 level and $128 dressed.

The mid-summer beef rally appears to have found a lull, typical for the post 4th of July period. Retailers reported slow sales and have backed product up in coolers. The Choice boxed beef cutout was at $151.69 the week of July 10 and this past week, fell to $142.63. Select product also fell to $123.93, closing the Choice/Select spread to $18.69. The Choice and Select primal cuts suffered comparable declines for the week, although the Select rib was sharply lower. Notable out front sales include Choice and Select briskets, Select trimmed top butts and 73 percent fed cattle grinds.

Slaughter levels have been strong for most of summer. Last week as of Thursday, slaughter levels were at 492,000 head steady with the same week a year ago. The week ending July 15 showed slaughter at 683,000 head compared to 658,000 the same week a year ago.

Several market analysts have pointed out that slaughter is running 4 percent more than a year ago while beef production is 6.5 percent higher than a year ago. Dillon Fuez at Utah State University attributed the increase in production to increased slaughter weights which are posting new records.

Last week, steer carcass weights were at 838 lbs., up 5 lbs. in one week and up 16 lbs. from the same time last year. Texas and Oklahoma feeders showed live steer weights at 1,247 lbs., up just 2 lbs. from a year ago. According to Jim Robb at the Livestock Marketing Information Center, the big extra carcass weights are coming out of the northern Plains states and Corn Belt feeders. The high level of calf fed placements in southern lots have kept those feeders fairly current in their marketings. Marketings are expected to show another solid month for June.

The slaughter cow market has started its season early due to dry weather. Good fleshy cows are trading at the $45 range and the cow beef markets have fallen along with beef from fed cattle as well. The cow beef cutout was at $100.88 and cow carcass beef at $72.50. The 90 percent lean beef markets were at $122.21 and 50 percent trim is at a annual low of $35.27.

Kansas State University reported in their latest feedlot survey that for the month of May, the closeout weight for steers was 1,264 lbs. versus 1,246 lbs. in 2005, while the average weight for heifers was 1,152 pounds, 22 pounds heavier than a year ago. So far this year, steer and heifer closeout weights are up 3 to 3.5 percent on average from 2005, respectively.

At 173 days, steers were on feed one week longer than a year ago. Average daily gain at 3.10 lbs. per day was above May 2005 levels of 3.05 pounds. Heifers were on feed an average of 162 days, 4 days longer than 2005 and posted an average daily gain at 2.85 pounds, slightly higher than last year. Compared to the prior five-year average, average daily gains for steers were comparable while daily gains for heifers were 1 percent better. The amount of feed per pound of gain (dry matter basis) for steers in May was 5.91 pounds, down from last year’s average of 6.01. Heifers closed out in May were reported at 6.13 pounds of feed per pound of gain.

For the month of May, surveyed feedlots reported the average cost of gain for steers at $53.61 per cwt., just $0.15 per cwt. lower than 2005, while the average cost of gain for heifers was $55.99 per cwt., up $0.20 per cwt. from a year earlier. When compared to the 2000-2004 average, cost of gains for both steers and heifers were 5 and 3 percent higher, respectively.

Feeder cattle

Hot and dry conditions put feeder cattle buyers in a sour mood last week and auction markets turned sharply lower in many areas as a result. Pasture conditions, according to one USDA market analyst, have deteriorated significantly in the past two weeks and few are willing to buy cattle when there isn’t much grass available.

Early weaned calves are heading to town now and market numbers are above year-ago levels in many markets as producers try to stretch available forage for their cowherds. Fleshy, unweaned calves were heavily discounted last week which placed a further drag on the market.
The bright spot in the feeder cattle market last week was the result of the first two big video auctions of the year. Superior Video Auction held their annual “Week in the Rockies” sale in Steamboat Springs, CO, July 10-14 and the results were very positive. Trade was very active across all classes of cattle and calves from across the country were called $3-5 higher. Northern yearlings were $4-8 higher while southern yearlings sold $3-5 higher. The large crowd on hand bid actively on an excellent set of cattle. Some representative lots from the sale include a consignment of 400-lb. Angus and Charolais cross steers from Wallace, NE, for October delivery which brought $165. A consignment of 490-lb. English and English Exotic cross steers from Alta Vista, KS, sold for $150.75 for August delivery.

Yearling representative lots from the same sale included a consignment of 760-lb. English and English exotic cross steers from Council Groves, KS, for August delivery which brought $118.75. A Tyron, NE, ranch sold 900-lb. Angus, Angus cross steers on September delivery at $118.

In Reno, NV, Western Video Market held their sale at the Silver Legacy Casino and a large crowd of buyers bid readily on an outstanding offering of quality cattle. Prices were very strong.

Representative lots of yearling cattle included a consignment of 800-lb. steers from Nebraska for September delivery which sold at $119. A consignment of Colorado 725-lb. yearlings brought $120.

Calves also sold well. A consignment of 500-lb. steers from Nebraska sold for $141 for October delivery. A Nevada ranch sold 400-lb. weaned heifers for November delivery at $155.50.

In auction market trade last week at Oklahoma City, OK, feeder cattle turned sharply lower on heavy receipts. Compared to the prior week, feeder cattle were $1-4 lower, with the least decline on weights over 800 lbs. Demand was called moderate despite fewer buyers on the seats. Steer and heifer calves were $4-8 lower, with some instances of $10-15 lower on fleshy unweaned calves.

At Abilene, TX, a light run of feeder steers and heifers under 500 lbs. were $1-3 lower, over 500 lbs. were steady to instances of $4 lower, yearlings were steady.

In Joplin, MO, compared to the previous week, steers under 800 lbs. and heifers under 600 lbs. were $2-4 lower. Heavier weights were called steady. Demand and supply were moderate.

Farther north in the Dakotas where the drought is taking its toll on the corn crop, cattle prices were mostly steady with the week prior although runs were light. In Torrington, WY, feeder steers and heifers were steady on a limited test.

The Chicago Mercantile Exchange feeder contracts last week traded in mixed territory. Wednesday, lower corn markets pushed feeder cattle contracts higher across the board. Last Thursday, contracts traded lower and gave up the previous day’s gains.

The August contract shed 45 points last Thursday to close at $115.27. September dropped 65 points, closing at $115.10. October feeders were 55 points lower at $114.70 while November feeder contracts were down 47 points, closing the day at $112.77. — WLJ