Fed cattle trade sharply higher

Cattle Market & Farm Reports, Editorials
Aug 14, 2006
by WLJ
— Fed cattle $5-6 higher live and $6-7 higher dressed.
— Feeder cattle follow feds higher.

Packers stepped up to the plate early last week and paid sharply higher prices for cattle in both the north and south Plains. Trading occurred late Wednesday afternoon at $86 live basis in the south, $5-6 higher than the previous week. In the northern Plains, packers paid $136 live, $6-7 higher than the prior week. Volume was reportedly good with feedlots in Texas, Kansas and Nebraska each trading approximately 90,000 head, according to USDA figures. Despite the good cleanup of feedlot show lists on Wednesday, there was some additional light trade reported on Thursday morning last week.

Analysts said the positive news from Japan, which reported that five tons of beef sold out in a single day, coupled with rising domestic demand in advance of the Labor Day holiday, were the primary factors in the rise in prices paid by packers last week. It also appeared that at least one major packer last week was very short on their supply of fed cattle, which added to the early trade.

Packer margins last week were much improved from prior weeks and on Thursday, HedgersEdge.com estimated packers were earning $46 on every head passing through plants. The margins were bolstered by a rising boxed beef cutout value last week. On Thursday, Choice boxed beef cutout values rose another 62 cents in morning trade to $147.59. The day prior prices had added $1.29 to the Choice cutout value. Select boxed beef was also up, adding $1.54 last Wednesday and another $1.09 Thursday to trade at $136.11. Trade was called moderate on light to moderate offerings from packers last week.

Packers, in an effort to take advantage of positive margins, ramped up harvest levels last week killing 127,000 head last Thursday for an estimated 502,000 head for the week-to-date total as of Thursday. That number was 64,000 head more than the prior week and 18,000 ahead of last year’s numbers. Retail movement of beef out of packing plants last week was good as buyers began forward contracting to meet holiday demand and cooler weather also led consumers back to beef cuts as grilling weather returned after a hot spell across most of the country which had decreased demand temporarily.

All of the positive news coming from the cash fed cattle trade, coupled with the improvement in the boxed beef complex, spilled over to contract trade last week. Prices were lifted significantly ahead of the Cattle on Feed report by the much improved trade on the cash side. On the Chicago Mercantile Exchange (CME) last Thursday, prices were also sharply higher. The August contract traded up 217 points to close the day at $88.47 and setting a new contract high in the process. In fact, during last Thursday’s trading session, all but the February contract broke through resistance levels to reach new contract highs. The October live cattle contract was up 192 points on the day and closed at $92.37. December contracts closed up 97 points to settle at $90.97.

Mike Roberts, commodity marketing agent for Virginia Tech, said last week that the boost in retail demand and the market opening in Japan were driving contract prices higher, but he cautioned that the market would be slow to recover overseas. There was also optimism last Thursday about Korean inspectors being dispatched to review the two plants that had previously failed the inspections by South Korea. The prospect of fully revived Asian trade added support to the already exuberant marketplace in Chicago and in the country last week.

“Quick shipments (to Japan) indicate better-than-expected price levels may be in order. Cash sellers should continue to sell live cattle as soon as they can at the heaviest possible weights,” Roberts said.
He also cautioned feeders not to jump into the corn market ahead of USDA’s crop report, due out last Friday, because of the current volatility.
“Corn users should not consider pricing more corn needs at this time,” Roberts said.

Feeder cattle

According to industry leaders, and taking a solid glance at the feeder cattle market, allows one to say with confidence that producers have little to no validity for complaints. Although auction markets across the country have feeder cattle prices staying steady to slightly higher, as well as slightly lower, prices are still strong considering drought conditions and a heavy supply. Also on the CME, contracts are all in the black.

Compared to a week prior in Oklahoma City, feeder cattle stayed steady to $1 lower. Steer and heifer calves were described as selling unevenly steady. Officials at the facility said demand was moderate to good. Supply in Oklahoma City was heavy with 9,200 head selling, compared to 7,966 the week before. Quality was staggering, being called plain to average with an increased showing of number 2 muscled cattle in thin to average flesh coming off short grass due to extreme drought conditions. Like many other geographical regions of the U.S., weather continues hot and dry. In all parts of Oklahoma, they have witnessed 23-plus days of 100 degree or better temperatures.

In Winter, KS, 1,058 fewer head were sold last Thursday, but the lighter supply increased demand and allowed producers to realize steady to $1 higher. Steers weighing 700-950 lbs. traded firm to $1 higher, with heifers weighing 700-900 lbs. steady in what was called a very limited supply. Slaughter cows brought good money, selling from $1-3 higher. Slaughter bulls in a very limited test, firm to $1 higher.

At the Joplin Regional Stockyards in Joplin, MO, last Tuesday, 4,800 head traded places compared to the 3,270 the week before. Trade could be called uneven in Joplin with a wide flux in prices. Compared to the week prior, steers under 700 lbs. were steady and over 700 lbs. steady to $2 higher. Heifers in south Missouri weighing 450-600 lbs. sold weak to $3 lower and heifers under 450 lbs. and over 600 lbs. traded steady. Similar to Oklahoma City, Joplin market officials said temperatures were forecast at 100 degrees plus and said the heat is holding the calf trade in check.
In Hub City, SD, at the Hub City Livestock Auction, 3,119 head went through the ring. Compared to the Wednesday the week before, feeder steers and heifers sold up $2-4 with good demand in all classes. Offerings included long strings of reputation feeders off grass, where the cattle were average to thin, again undoubtedly due to drought conditions.
At the Billings, MT, Livestock Commission Co., 555 head sold where feeder cattle offerings were too limited to offer any price comparisons. However, the market sold slaughter cows and bulls steady to $1 lower.
Six hundred and forty head sold at the Stockland Livestock Auction in Davenport, WA, up 300 head from the Tuesday prior. Slaughter cows and bulls, like most other markets, were realizing higher prices. They were bringing steady to $1 higher in Washington last week. Trade was also described as active with good demand.

In the most recent Superior Livestock Auction, held July 31 through Aug. 4, over 207,820 head sold with consignors from 31 states. The auction was held in Winnemucca, NV. Officials there said the demand was “excellent” and trade “very active” on all classes of cattle. The calves on cows in the southern region were $2-5 lower while the weaned calves were selling mostly $2 higher in all tiers. Egbert Livestock in Wells, NV, sold 410-lb. calves that were certified natural from Anus and Angus cross for $158.85 per cwt. Skinner Ranches in Jordan Valley, OR, sold 515-lb. certified natural Red Angus and Hereford cross steers for $140.50 per cwt. The yearling steers were trading steady to $2 higher while heifers suffered $2 lower. Officials at the market said the largest interest was in good quality, conditioned yearlings to be “delivered immediately.”

Van Norman Ranches in Tuscarora, NV, sold Angus and Beefmaster cross steers weighing 725 lbs. for $114.50 per cwt. Delong Ranch in Winnemucca, NV, sold 800-lb. certified natural Red Angus/Charolais cross steers for $115.50 per cwt. Debruycker Charolais sold cross steers weighing 890 lbs. for $112.85 delivered. Cedar Top Ranch in Stuart, NE, received $116.25 for their yearlings weighing right around 860 lbs.
On the CME, contracts traded significantly higher across the board as a result of spillover enthusiasm from the live cattle pit last Thursday to reach some new contract highs. August contracts traded $1.33 higher, closing at $117.40, which was 15 cents short of being a new contract high. September did reach new highs last Thursday, increasing 150 points, settling at $117.45. October contracts traded 140 higher to close at $117.93. November followed trend, settling at $116.75, which was 105 points higher than last Wednesday’s $115.20. — WLJ