Trade expected steady to slightly higher

Cattle Market & Farm Reports, Editorials
Aug 28, 2006
by WLJ
— On feed report does little to move market despite jump in placements.

Fed cattle trade last week was at a virtual standstill with offers last Thursday at $88 live basis and $139-$141 on dressed cattle. Packers were still about $5 below live and $5-6 on the dressed asking prices at press time last week. Trade was expected to be at least steady to higher when it did finally occur last week.

“Producers have every reason to hold firm given the packers’ record of caving in at the last minute and having the economic incentive to add weight,” said Andy Gottschalk at last week. He estimated that despite a falling cutout value, packers last Thursday were still in positive territory, earning approximately $3.35 per harvested animal, down approximately $23 per head from the prior week.

The cattle on feed report issued by USDA on Aug. 18 was essentially a non-event. It was largely in line with pre-report expectations and did little to provide market direction.
Mike Roberts, commodity marketing agent for Virginia Tech, said last week the report “showed no surprises, was basically neutral, and slightly bullish to feeders.”
Roberts said he was optimistic about prices over the next 12 months as a result of a potential production void due to good prices and dry weather.

He said some analysts noted that placements in earlier months were heavier and are hitting the market now.

“Cash sellers should sell live cattle at the heaviest possible weights, not hurrying anything out the door. Hedgers should seriously consider protecting December and February marketings,” he said.

Packers, who have largely filled pre-Labor Day demand, are faced with a decline in consumer interest in higher priced beef items. Retailers are largely focused on value and were straying away toward pork and poultry last week as feature items. Beef will certainly factor into holiday grilling plans, but based upon the large demand for grind product, it seems they will choose to serve hamburger rather than steak. Middle meats are still dragging down carcass cutout values with the only strength to be found in the end meats right now.

Last Thursday for instance, the Choice cutout value dropped $1.23 to trade at $146.40. Select cutout values were down 76 cents, to $136.11. The spread, under $11, was expected to continue to narrow until the retail sector was able to stir demand through lower priced features. Despite the softness in cutout values, packers were taking advantage of the positive margins to make hay while the sun shined. Harvest last Thursday was estimated at 128,000 head. That number was up 7,000 head above the prior week and 3,000 above 2005 levels. For the week last week, USDA estimated harvest as of Thursday at 509,000 head, 12,000 above the previous week and 22,000 above the prior year.

On the Chicago Mercantile Exchange (CME) last Thursday, live cattle futures traded modestly higher with the nearby August contract gaining 92 points, closing at $88.12. October contracts gained 87 points to close the day’s trade at $92.32 and December was up 62 points, to $91.42, at the end of Thursday’s session.

Feeder cattle
The anticipation of at least steady to possibly higher fed cattle trade last week fueled the demand for feeder and stocker cattle and prices across most of the country, along with contract trade on CME, was mostly higher. There was some weakness in the corn market as a result of improvements in crop condition and better than expected yields being found on crop tours. That weakness added strength to feeder cattle in many areas. Although there are a number of reports of early weaning and continued problems with drought in much of the central U.S., the large runs of fall calves haven’t started trickling into auction markets yet, or in some cases are already past, leaving producers to sell bred cows. Fortunately, despite the awkward trickle of cattle into markets, prices have remained strong for the past several weeks for not only cows, but also feeder cattle. Both Western Video Market and Superior Video Market sales found strong prices for their customers and willing buyers. Western Video Market sold some good lots of cattle in the 510- 565-lb. range for $139-145.50. Another bunch in the 500- 535-lb. class sold in a range of $132.50-137. A lot of 600-lb. feeder steers brought $136 and some steer consignments in the 830- 860-lb. class sold in a range of $107.75-113.75.

On CME last week, prices moved higher in unison with fed cattle contracts and were steady to slightly higher with the prior week. The nearby August contract traded 35 points higher last Thursday to close at $116.25, nearly 75 points above its Thursday close the week prior. September feeder contracts last week were mostly steady to slightly lower than the previous week. In last Thursday’s session, the contract traded 17 points higher to close at $116.27. October and November were also mostly steady with October gaining 25 points to close at $117.17 and November up 30 points to close at the same price in last Thursday's trading session. The feeder cattle cash settled index as of Aug. 22 was up slightly to $116.18.

In auction market trade, in Abilene, TX, last week, feeder steers were steady to $2 higher, yearlings $1-3 higher. Feeder heifers steady, yearlings steady. Slaughter cows and bulls steady. Replacement cows and cow/calf pairs sold for prices steady to firm with the previous sale. Trade was called good and demand active.

At Oklahoma City, OK, the Oklahoma National Stockyards sold cattle higher last week. Feeder steers and heifers were steady to $1 higher. Steer and heifer calves steady to $3 higher. Demand good for all classes. Some rain and cooler temperatures over the last weeks have brought relief to parts of the region but some areas remain very dry.
In West Plains, MO, compared to the prior week, light steer calves under 450 lbs. and heifers under 400 lbs. were $2-5 higher, steers over 450 lbs. sold $1-3 higher, with most advance on 500-650 lbs. Heifers over 400 lbs. were steady to $2 higher, although weights over 700 lbs. were not well tested. Supply moderate, both quality and flesh conditions, in most cases, not as attractive as last week. Demand good, continuing best on better quality, uniform lots of weaned calves having received one to two rounds of vaccinations and most all yearling cattle. Cattle feeders and backgrounders, currently in the market, continue showing a bullish side and obviously feel comfortable with the market remaining fairly stout or perhaps just nervously hoping.

In McCook, NE, last week, steers and heifers under 600 lbs. were called steady to $3 lower. According to market reports, there were not enough over 600 lbs. to call a price trend at the sale.

n Hub City, SD, one of the few northern tier markets to have sold a significant number of feeder cattle, steers and heifers sold steady. In Sioux Falls, SD, a light run of feeder cattle sold with higher undertone noted.

On the west coast in Galt, CA, feeder steers and heifers under 600 lbs. sold for prices mostly steady with the prior week. Feeder steers and heifers over 600 lbs. sold for prices mostly $2-3 higher than the week prior. — WLJ