Feeder cattle market begins to feel Wall Street´s impact
Market (from page 1)
The sideways cash trade last week did little to improve the futures prices last week which continued to move lower as questions about the economy continue to weigh on traders at the Chicago Mercantile Exchange.
October live cattle contracts closed Thursday at $100.95, down 122 points from the previous day, while December lost 157 to close at $102.62 and February slid 82 points to end the day at $103.50. Traders noted last week that the expected tight supplies of market-ready fed cattle through the fourth quarter of 2008 and into the first quarter of 2009 could help spur prices higher, particularly if foreign buyers continue to be attracted to U.S. beef. The cattle on feed report, issued Sept. 19, showed that already tight supplies are beginning to cut into the number of market-ready cattle in some feeding areas.
However, a large supply of finished cattle in the northern Plains and Corn Belt region is pressuring prices in the market and analysts pointed out that prices are expected to remain under pressure until those cattle are pushed through the pipeline. However, they noted that once those animals are sold, the fundamentals of tight supply are likely to help create upward momentum in both the futures and cash markets, particularly if demand increases in either the domestic or international markets.
The international markets, particularly with the favorable exchange rates many of them are currently enjoying, remain a strong opportunity for U.S. beef sales. The latest figures from USDA’s Foreign Agriculture Service show that for the month of July, total U.S. beef exports, including variety meats, reached 98,971 metric tons, an increase of 11.1 percent over June and up 18.5 percent from July 2007. Mexico, through the month of July, continued a strong lead as our most important buyer, with a year-to-date total of more than 240,000 metric tons shipped across the border. Canada is the second-largest beef buyer, at nearly 96,000 metric tons, however, Egypt has somewhat surprisingly moved into third, ahead of Japan, with almost 46,000 metric tons shipped, an indication that much of the current market strength can be attributed to the volume and value of U.S. beef being shipped overseas.
Crisis in the financial markets has begun to spill over into the feeder cattle markets where already wary buyers have adopted a “wait-and-see” strategy.
Determining what events unfold on Wall Street will give producers and feeders a clearer picture of how to market and purchase cattle in the near future.
Just as high feed prices have already put a pinch on buyers and have had an up and down effect on the market for heavier cattle, the roiling issues facing the U.S. economy have also warned many buyers out of the market for feeder cattle at this time. Though prices for feeder cattle haven’t plummeted to historic lows, a continuing downward trend in the market has created a small but growing crisis for some producers as they bring cattle to town. Rumors of the proposed $700 billion government bailout aimed at investment banks has hit auction markets hard, says DTN analyst Walt Hackney, who notes that only time will tell to what extent the greater economic crisis impacts cattle markets.
“Usually, the cattle industry can right its own ship and even out the keel in times of adversity, but we seem to have entered an era (hopefully more short term than any extended time frame) whereby the controlling influence on cattle prices is coming from areas of the American society that, up to now, have never been a visible factor in determining cash values of live cattle,” he theorized.
“The pressures of these outside influences are gradually putting a steady damper on feeder markets as buyers sit back in a state of confusion, waiting out the economic mess we are in.” USDA market reporter Corbitt Wall also noted the significant impact that Wall Street’s debacle is having on the cattle market at large when coupled with weather issues, has drug the feeder cattle demand down significantly.
“The sharp losses in the financial markets bled over into agricultural commodities as fund interests pulled their stakes to shore up their own portfolios,” he explains.
“Cash fed cattle prices held steady this week, but feeder demand turned light as buyers stepped back to wait for the dust to settle. Direct feeder cattle trading was very slow as the industry looked to the auction markets for direction, and the direction was south. Additional pressure came from the destruction of Hurricane Ike and flooding from its remnants that affected areas well inland.”
Further north in the central Plains, moisture from the hurricane has helped improve wheat grazing prospects as farmers seek to get every available dollar out of their crop. “More wheat could be available for grazing this fall, despite the handsome $7/bushel price, as many wheat farmers forewent last winter’s grazing dollars only to lose their entire crop to severe drought in the spring,” he pointed out. Last week’s sale at the Oklahoma National Stockyards in Oklahoma City, OK, saw receipts of 10,892 head, where feeder steers and heifers went $1-3 lower. Demand was moderate to good for feeders. Steer and heifer calves were steady to $3 lower, with the greatest price decline coming before noon on sale day. Demand was moderate to good for longweaned calves, and light for fleshy, un-weaned calves.
Feeder cattle were mostly in slightly thin to medium flesh with average to full weighups. Steers weighing 724 lbs. sold for $110.30 at this sale, while 737 lb. heifers brought $101.79.
The Joplin Regional Stockyards near Joplin, MO, received 4,500 head of cattle for sale last week where steers under 700 lbs. were $1-3 lower. Heifers under 700 lbs. dropped $2- 5 lower, with yearlings over 700 lbs. holding steady. Demand and supply were moderate to light, with the bulk of the calves in medium to fleshy condition and most having not been put through a working chute.
Buyers paid $107.72 for steers weighing an average of 729 lbs., and $100.50 for heifers weighing 757 lbs. A total of 2,932 head were received for sale last week at the Winter Livestock Feeder Cattle Auction in Dodge City, KS, where compared to the previous week, steers and heifers from 300-900 lbs. in thin to moderate flesh conditions sold steady. Those with excessive flesh and/or fill sold $2-4 lower. Fleshy feeder steers weighing 762 lbs. sold at $101, while fleshy, 637 lb. heifers sold at $102. There were 2,300 head offered last week at the Tri- State Livestock Auction in McCook, NE, where steers and heifers under 600 lbs. trended steady to $6 lower.
There were not enough cattle weighing over 600 lbs. for an accurate market comparison. Steers weighing 690 lbs. sold at $113.81, while heifers weighing an average of 635 lbs. brought $112.50.
The La Junta Livestock Commission Company in La Junta, CO, saw 1,069 head received for sale last week where compared to the previous sale, steer calves were steady to $1 lower. Heifer calves stayed steady to $1 higher. Yearling feeder steers and heifers were lightly tested. Steers averaging 704 lbs. sold for $110 at this sale, while 655 lb. heifers were good for $95. Last week’s sale at the Riverton Livestock Auction in Riverton, WY, had reported receipts of 852 head where demand for feeder cattle was moderate though there were not enough steers or heifers for a good market test. Buyers paid $100.50 for steers weighing 757 lbs. and $100.50 for heifers weighing 773 lbs. — WLJ