Fed cattle trade moves higher
— Drop in corn boosts feeders.
Fed cattle trade continued its trend of early trade last week. Good numbers of cattle were sold in Texas, Kansas and Nebraska last Tuesday at $88 live, up $1 from the prior week, and $138-139 dressed basis, up $3-4 from the prior week. USDA estimated the trade volume on Tuesday at more than 86,500 head.
The increase in packer offers was somewhat of a surprise and fueled mostly by an increase in demand from consumers for the post Thanksgiving holiday buying period. That demand helped move the cutout value higher in Tuesday’s trade and allowed packers to pay higher prices for cattle to secure their supply for the week. The Choice boxed beef cutout value rose $1.40 last Tuesday to trade at $142.05 and Select rose $1.09 to trade at $128.90. Even at the higher prices, packers were still in the red, losing an estimated $9.50 per head, according to HedgersEdge.com calculations.
Last week, buyers at the wholesale level were willing to pay more for chuck and round items, which are on the rebound now that the chicken and turkey prices have started to move higher. Demand for Choice middles also continues to maintain its strength, adding support to the cutout value. Last Tuesday, Choice primal loin was trading at $217.25 and Choice rib primals were also strong, trading at $254.94, mostly steady with the prior week as a result of year-end advance buying. Once that demand is met however, market analysts caution there could be a downturn in both, leading to a lower cutout
In an effort to meet the demand, packers were still moving chains along at full speed. Harvest on Tuesday last week was estimated at 130,000 head, up 2,000 from the prior week and 1,000 from 2005. For the week, as of last Tuesday, packers had slaughtered 258,000 head, up 1,000 from the prior week and 5,000 from a year earlier.
As expected, the Nov. 1 cattle on feed report played little role in fed cattle trade last week. The report came in mostly within analyst's expectations. The single biggest disappointment could have been the marketing rate. Although marketings were higher than a year ago, it was only as a result of the addition of one marketing day. The lagging rate of fed cattle marketings can be seen by the number of cattle on feed more than 120 days.
“The average daily fed cattle marketings were down 3.1 percent last month. November marketings may improve, however, as slaughter in recent weeks has increased over year-ago levels,” said University of Nebraska Agricultural Economist Darrell Mark.
The slower than expected marketing rate in October led to a 15 percent increase in the number of cattle on feed more than 120 days compared to 2005. Mark said the increase in front-end supply could lead to price pressure in the weeks ahead.
“Likely, fed cattle prices during December and January will be affected by the aggressive placements of light weight feeder cattle earlier this year,” he said. “Still, fed cattle prices are expected to be in the mid- to upper $80s for the next several months. Beyond that, lower placements in October are favorable to the deferred fed cattle markets, and should help support prices in the mid-$80s until next summer.”
The futures market seems to also hold the same sentiment. Nearby live cattle contracts on the Chicago Mercantile Exchange (CME) were slightly higher as a result of the uptick in last week's cash trade in Wednesday's session. Deferred months were also showing good gains. December live cattle contracts were up 12 points to $88. February traded even with the previous day at $90.92, April was up 10 points at $91.55, while June and August were both up 22 points, trading at $88.30 and $87.10, respectively.
Like the fed cattle markets last week, feeder cattle also moved higher as a result of a pause in the climbing grain markets. December corn at mid-day on Wednesday was trading 2.5 cents lower at $3.58 a bushel, down 8 cents from the prior week. Although corn price objectives are still upwards of $4 per bushel, feeder cattle buyers used the temporary slowdown in corn prices to bid feeder cattle higher. The CME cash feeder cattle index last week was $98.69, nearly $1 higher than the prior week and feeder cattle futures were also rising in mid-day trade last Wednesday. The January 2007 contract was trading 62 points higher at $99.40 and March was up 27 points to $98.30. April feeders traded up 30 points and May was trading up 45 points to $98.80 and $99.20, respectively.
In auction markets, the good news in fed cattle and grain markets also helped ease cash prices higher last week in several markets. Prices in the central Plains were mostly higher. In the south, some Texas markets showed some slight weakness, while farther north prices were mostly higher despite corn prices that are nearly double last year's price.
In Three Rivers, TX, last week, feeder steers sold steady to weak. Feeder heifers were weak to $4 lower on active trade and good demand.
In Oklahoma City, OK, some additional rainfall and adequate wheat conditions added to buyer morale and prices were moderately higher last week. Feeder cattle sold for steady money, while steer and heifer calves were called $1-3 higher. Demand was good for all weights and buyers were not as selective as they have been during the last few weeks. The day's run included several program calves (value added) all certified to at least 45 days weaned and with all their shots. Quality was reportedly average to attractive with several long weaned calves included.
In Joplin, MO, compared to the prior week, steers sold $2-3 higher. Heifers sold $3-6 higher with 400-600 lb. cattle as much as $8 higher. Demand and buyer attendance was good with active bidding. Quality of calves was called average to good with several loads of top quality yearlings, a rarity in most markets these days.
In Loup City, NE, compared to the prior sale two weeks earlier, feeder calves less than 600 lbs. trended $4-5 higher, while those over the 600 lbs. traded closer to steady. Cattle quality and buyer demand were reportedly good to very good.
In Mitchell, SD, last week, compared to the sale two weeks prior, feeder steers and heifers traded $2-4 higher. Demand was called very good on an active market.
Farther to the west at Billings Livestock Commission in Billings, MT, steer and heifer calves were reportedly fully steady, with the exception of heifers in the 500-550 lb. class, which were called $5 lower. Demand at the market continues to be good and quality remains very attractive.
In Davenport, WA, compared to the prior Monday at the same sale, feeder cattle were reported to be steady to firm in a light test. Trade was called moderate with light to moderate demand.
In Famoso, CA, prices were widely mixed compared with the previous sale. Lighter weight calves were mostly lower, while heavier weights were steady to higher. Steers in the 400-500 lb. range were $85-110. Heifers in the same class were $80-94. Steers in the 600-700 lb. weight class were $85-91.50; heifers were $78-86.25. Heavyweight steers 800 lbs. and up traded for $80-86 in last Monday's sale. — WLJ