Feds pressured by oversupply

Cattle Market & Farm Reports, Editorials
Aug 1, 2005
by WLJ

— Beef demand still lagging.
— Northern trade $2 softer.

Early week thoughts of a steady fed cattle market last week went by the wayside come Wednesday afternoon as reports of another possible BSE case raced across the U.S. In addition, domestic market fundamentals, not Canadian cattle imports, were cited for some of the bearishness seen late in the week.
As of midday Thursday, just a trickle of cattle had traded hands in Nebraska at mostly $122 dressed, $77 live. Those prices were mostly $2 softer than prices the week prior.
Cattle feeders in Texas and Kansas were still holding out in an effort to try to get steady money. Packer bids, as of press time, were mostly $76-77, while asking prices hovered mostly around $80.
The market pressure was not said to be the result of Canadian cattle coming back into the U.S. Between July 18-26, only 2,910 head of Canadian fed cattle had been shipped to U.S. packing facilities. That figure is only about two percent of one business slaughter day in the U.S.
“It’s more a psychological thing, rather than a realistic determinant,” said Jim Robb, chief analyst with the Livestock Marketing Information Center.
The boxed beef market continued to fall last week, with Choice getting down to $124.91 last Thursday morning and Select being reported at $118.36. Choice began the week just over $127, while Select had been at $120.83.
Boxed beef volumes were very large last Tuesday and Wednesday, with 748 and 567 loads of cuts and grinding product moved, respectively.
That active movement, however, didn’t result in packers processing any more cattle than the previous week. The national slaughter volume between last Monday and Thursday, was ???,???, compared to ???,??? two weeks ago. For the week ending July 24, slaughter totaled 653,000 head, 1,000 head more than the previous week and 7,000 head more than the same week a year ago.
Analysts continue to say that only around 625,000 head of cattle are needed to meet current demand levels, both domestic and export markets combined.
Finishing weights of cattle continue to be a concern to market analysts, as it takes fewer cattle to meet current beef demand. For the week ending July 24, USDA’s average finishing weight for marketed live cattle was 1,291 pounds, 30 pounds heavier than last year. The average carcass weight for fed steers last week was 840 pounds, three pounds more than a year ago.
Packers continue to bleed red ink, and that was keeping their interest in paying even steady money very muted. Through most of last week, packer margins ranged in the minus $12-18 range, analysts said.
Packer demand was also considered down due to the extremely active trade volume the previous week. For the week ending July 24, approximately 240,000 fed cattle traded on the spot cash market. That was the largest weekly movement in several months, analysts said.
The number of cattle that have been on feed for longer than 120 days, as of July 1, was 3,318,000, called 10 percent above last year and seven percent more than the five-year average.
Feeders slide
While there were a few exceptions in the feeder cattle market last week, the overall trend was $2-5 softer. Price fluctuations occurred due to a wide range in quality and longer-weaned calves were selling at a premium, compared to calves that had just been pulled off the cows. A moderating in the heat wave for some parts of the country and some rain early in the week in the central U.S., helped prices in isolated areas.
Overall supplies of feeder cattle were very light. Buyer demand was listed at moderate to good in most locations, as buyers sidelined by the uncertainties the previous week jumped back in the game. Southern tier states showed better results overall with select markets in Texas and Missouri rising $1-3 higher for lightweight calves, with one report of $3-6 higher. Most markets reported a significant decline in the number of offerings for the week. The few heavyweight cattle being offered were purchased at a discount by feeders facing increasing per-head losses in the fed cattle market.
Little activity was reported in northern-tier feeder cattle trade, despite moderate buyer demand in most areas. Analysts believe that feeder calf marketing is being artificially suppressed by the psychological effect of renewed Canadian live animal imports, despite the fact that only 1,105 feeder cattle had crossed the border between July 18-26.
The USDA’s report of a “non-definitive” BSE test reported in the middle of the week is likely to drag on the market until a conclusion is reached by the USDA. Until then, prices are likely to remain stagnant and offerings few, despite analysts urging to “sell ‘em if you’ve got ‘em.” Many analysts feel that prices will continue to slump as market concern continues in the face of pending BSE results, a possible spike in corn prices and softening fed cattle markets leading to increasing feeder losses potentially lasting through the end of the year.
The Chicago Mercantile Exchange feeder cattle index was down to around $109 last Wednesday, compared to over $111.30 the previous week. — WLJ


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