Fed cattle expected steady
Feedlots were holding out for higher money last week as a result of higher boxed beef prices and what was expected to be a supportive cattle on feed report, in some respects. Pre-report estimates were calling for at or near record high numbers of cattle on feed for the month. However, placements were anticipated to be smaller and marketings solid for the month. Those expectations were causing packers to hold onto cattle in the hope of improving packer bids.
On the other hand, packers, whose margins were still estimated to be minus $14.15 by HedgersEdge.com, were sticking to their offers last week. Boxed beef cutout values received a slight boost last week from lower production levels. Packers, who announced two weeks ago they would trim kill levels, followed through, and in the process raised Choice boxed beef cutouts more than $3.50 from the prior week. Choice cutout value on Thursday was down slightly at $146.21. Select cutout values were five cents higher at $136.41 in last Thursday’s trade. Those prices are up from $143.32 on the Choice and $134.44 on the Select from the previous week.
Last Thursday, packers harvested 125,000 head, up slightly from the prior week and 3,000 head above a year ago. For the week to date as of last Thursday, packers had harvested 498,000 head, down from 502,000 the prior week, but up from the 487,000 head harvested during the same week last year.
On the Chicago Mercantile Exchange last week, live cattle contracts were mixed as futures traders waited for cash trade and USDA's cattle on feed report. In Thursday trade, contracts were lower across the board. October was down 70 points to $87.87, December was 65 points lower at $87.20 and February was down 57 points to close the session at $89.95.
According to Virginia Tech Commodity Marketing Agent Mike Roberts, live cattle futures were mixed with the nearbys lower amid concern for higher feed costs pushing fed cattle to market sooner rather than later.
“Floor sources stated today they were still concerned that feedlot supplies are adequate and rising feed costs will push cattle into packer yards. Trader's expectations are that beef packers will not reduce slaughter rates to any appreciable extent due to very high fixed costs,” Roberts said. “A lack of positive export news from Asia added a bearish tone to the market.”
Roberts encouraged cash sellers to consider protecting a portion of fourth quarter 2006 and first quarter 2007 marketings.
“Hedgers sensitive to the downturn in this market should be on short positions by now. Corn users should hold off pricing inputs at this time while considering selling a put option,” Roberts said.
Feeder cattle trading last week was also on a downward trend, largely as a result of the very strong corn market. Corn prices jumped to $3.16 per bushel for new crop December corn futures on the Chicago Board of Trade last Thursday. The rise in prices, more than 18 cents per bushel in a week, added heavy pressure to an already weakened feeder cattle market.
According to market reports from across the country, feeder steers and heifers sold $2-5 lower. This is the fifth consecutive week of downturns and some calves were off $20-25 per cwt. during this slide. The price slide, along with harvest time and the fact that a lot of calves were marketed early as a result of drought, has pushed down auction market receipts to low levels in most areas.
Buyers are only purchasing cattle in a “hand to mouth” fashion, according to Livestock Marketing Information Center Economist Erica Rosa.
On the West Coast, the fall runs are resulting in heavy runs of feeder cattle at this time of year and prices there are mostly steady despite the volume. In Toppenish, WA, last week, feeder cattle steady to $3 lower. Trade was called moderate with good demand. In Klamath Falls, feeder steers sold $3 lower and feeder heifers were $3-6 lower with demand for all classes moderate to good.
At Famoso, CA, feeder and stocker cattle last week were $3-4 lower last Monday. Demand for stocker cattle was excellent, with the best call for quality steers and heifers in the 450-525 lb. range, although prices were somewhat softer as a result of climbing corn prices. Feeder cattle were in excellent demand, particularly the 650-750 lb. steers and heifers.
In Billings, MT, steer and heifer calves were in short supply last week and were steady to slightly lower. Demand was called good for light fleshed calves under 550 lbs. and moderate for heavier weights.
In Riverton, WY, last week, feeder calves came under heavy pressure with steer calves under 500 lbs. trading steady to $2-5 lower with instances of $8-9 lower. Cattle over 500 lbs. were mostly $5-7 lower. Heifer calves under 500 lbs. traded steady with some instances of $1-6 lower, over 500 lbs. were $2-3 lower with instances of $6-8 lower on 550-600 lb. cattle. Demand was called moderate to good.
In La Junta, CO, compared with the previous sale, steer calves under 600 lbs. were $2-3 lower except for 500 to 550 lb. calves, which were steady. Heifer calves under 450 lbs. were steady, while those over 450 lbs. were $2-3 lower, except for 450 to 500 lb. calves which were $5 lower. Yearling feeder steers were lightly tested. Yearling feeder heifers were $1-2 lower. Trade was called moderate to active with demand moderate to good.
In Joplin, MO, compared with the prior week, steers and heifers sold $3-6 lower, with some reports of $7-10 lower. Demand was called moderate with quality average to poor in most classes. Yearlings over 700 pounds were reportedly scarce. Receipts at Joplin were much lower compared to last year as a result of market prices as much as $20 lower compared to sales last month.
In Oklahoma City, OK, where runs continue to be well below last year's numbers, prices last week were $2-3 lower on feeder steers and heifers. Steer and heifer calves were $1-3 lower, with the most loss on calves over 500 lbs. Demand was called moderate to good for calves, the best action on long weaned calves.