Market holds steady
News last week that South Korea had shut off beef trade, at least temporarily, presented the market with a potential setback, and perhaps enough reason to stall fed cattle trade. The news of banned materials being found in a shipment from Cargill’s Friona, TX, plant gave traders on the floor at the Chicago Mercantile Exchange (CME) reason to cash in their chips last Wednesday, taking profits from over-bought contracts, sending the market lower.
Live cattle contracts and feeder contracts had run up impressively over the prior week, so it appeared the sell-off would be likely anyway. Whether it would have been as steep a drop without the unfortunate news from South Korea was difficult to determine, however, after setting new life-of-contract highs, some profit taking was inevitable.
Regardless, that reversal brought an end to last week’s upward momentum and stalled any action in the cash market until later in the week. Analysts last week said they expected trade to develop at steady to slightly higher money despite the pullback in the futures market and the bad news from overseas. As of mid-day last Thursday, asking prices were holding firm at $94 and up in the southern Plains and at $148 plus in the north. Prior week sales averaged $90-91 live basis in the north, with dressed trade at $140-143; in the western Corn Belt, live sales traded at $88-90 and dressed sales ranged between $140-142. In the southern Plains, live sales traded at $91-91.50 and dressed sales in Kansas were in a narrow range of $143-143.50.
Despite the problems in Korea last week, the domestic market showed signs of life and packers were able to move the cutout values higher on good product movement. As of mid-day last Thursday, the Choice boxed beef cutout was up at $144.66 while Select was higher at $138.90.
There were reports last week that beef shipments to Canada and Mexico have picked up in recent days as a result of the slipping U.S. dollar against foreign currency. Forward contracting by domestic buyers is also adding support to the cutout as demand begins to pick up seasonally at home. Depending on the results of the Korean investigation, the boxed beef markets should continue to strengthen as we progress into the fall. That strength will be critical if the industry is to maintain fed cattle prices at expected levels in the fourth quarter.
Packers last Thursday processed 124,000 head, down 1,000 from a week earlier, but up substantially from 105,000 head last year. For the week to date tally through last Thursday, packers had killed 497,000 head, 1,000 fewer than the same period a week prior and 57,000 more than the same period in 2006. Feedlots remain in a very current condition, with reports of some pulling cattle forward. However, premiums in the futures markets for the final quarter of this year are likely to limit that practice soon, if they haven’t already. CME live cattle contracts ended last Thursday’s session in the red across the board. August live cattle issues declined 50 points to settle at $92.92, while October fell 62 points to $98.15. December 2007 and February 2008 contracts dropped back below $100, dropping 32 cents on the December contract, which ended at $99.95, and 57 cents on the February contract, which closed the day at $99.45.
Corn markets gained some strength last week after private analysts began releasing crop projections that proved to be bullish for the market. That forecast, which predicted a 148 bushel per acre average yield, added to the positive tone for the corn market and amounted to a 12.644 billion bushel production forecast for U.S. corn. This was much lower than current expectations for a crop near 13 billion bushels. December new crop corn traded higher last Thursday following the report to end the Chicago Board of Trade session five cents higher at $3.41. That prediction, coupled with a tough couple of trading days in live cattle markets, sent feeder cattle contracts sharply lower, dropping them from contract record highs set early last week. The August contract fell $1.05, closing last Thursday’s session at $115.92. September was down the same amount, closing at $116.35, and October dropped 87 points, ending the day at $117.32.
Cash trade last week was a different matter altogether, particularly for those cattlemen selling yearlings on Superior’s Winnemucca, NV, video sale. Prices being paid for yearling cattle were very good. For example, 190 head of 780-785 lb. steers sold in a range of $113.60 to $118.75, while 238 head of 800 to 840 lb. steers sold in a range of $115.10 to $117.25. In addition to solid prices being paid for heavyweight feeder cattle, lighter weights, particularly those for later delivery, sold well, such as 160 head of 600 lb. steers which brought an average of $127.50 or 200 head of 500 lb. steers which brought an average of $141.
Country auctions were also strong last week as a result of a good mixture of positive news, from continued good grazing conditions in many areas keeping cattle on grass to the run in contract trade. For example, at Oklahoma City, OK, compared to the prior week, feeder cattle and calves sold firm to $2 higher, with some instances of $3-4 higher on 500-650 lb. steers. According to market reports, demand was extremely good for light receipts.
Meanwhile, to the north in West Plains, MO, steers under 450 lbs. and heifers under 500 lbs. were $2-5 higher. Heavier weights sold steady to $2 higher, with the advance mainly on weights over 600 lbs. In particular, steers over 800 lbs. and heifers over 700 lbs. sold $2-3 higher on moderate to heavy supply and good demand. According to market reports, some producers in the area are selling calves somewhat lighter than usual because of a lack of recent rainfall.
In Hub City, SD, feeder steers and heifers sold mostly $2-3 higher on a light test, typical for most markets in the north and western portions of the country where runs were still seasonally light last week. Hot, dry conditions in the northern Plains are also preventing some cattle producers from moving cattle. There have been several consecutive weeks of hot conditions from Idaho and Montana east through the Dakotas and into the upper Midwest.
Farther west, along the coast, and particularly in California where producers have been suffering the impact of a very dry year, sale prices remain strong for offered cattle. In Cottonwood, CA, last week, stocker and feeder cattle under 600 lbs. were $1-2 higher, while those over 600 lbs. sold steady. According to market reports, smaller and single lots sold for prices $7-10 below top offerings.