Fed cattle prices improve
The cash fed cattle market improved some last week as futures markets posted increases in early week trade and cutout values finally found a level of support. Those two factors helped improve sentiment, and trade looked to be steady to $1 higher when it developed. Trade was slow getting started and looked to be put off until late last week, perhaps until Friday.
The last fully established trade came Feb. 19 at $80 in the southern Plains with some Kansas dressed sales at $127. In Nebraska, live sales were in a range of $78-80 and dressed sales were in a range of $127-129. In Colorado, live sales sold from $79-80 and dressed sales sold at $127.
The boxed beef markets looked like they were beginning to find a near-term bottom and packers were talking about cutting kill levels last week, which would add support if they follow through with the plan. Last Thursday’s midday price for Choice was down $1.13 at $132.94 while Select was off 28 cents at $131.42, however, movement was good with 302 loads trading hands.
Vetterkind Cattle Brokerage analyst Troy Vetterkind said last week that he believed prices were likely to begin to recover.
"Most of the end meat complex was trading at discounted price levels, however, once again, we saw very good movement of inside and outside rounds. Ground beef and boneless beef markets were mostly steady, with a few markdowns on ground sirloin. "(It) feels like perhaps the beef market is finding a level of support and we could see higher prices going into next week," he said.
The Choice/Select spread remains at very low levels both as a function of lower demand from mid-level restaurants and the number of Choice-grading cattle which has spiked to more than 60 percent of the slaughter mix, according to Chicago Mercantile Exchange (CME) analysts Steve Meyer and Len Steiner. The said the result is a Choice/Select spread which is at its lowest point since they began collecting the data in 1999.
"We believe this is partly due to slaughter weights that are at record levels for January and February and still very near October’s normal seasonal highs. In addition, the slowdown in restaurant traffic that we have noted would suggest lower demand for Choice beef. It appears that Choice beef is a "buy" for consumers at these levels — provided they are still spending money for beef," they said last week.
The narrow spread is also an indicator of the currentness of feedlot inventories, which, when record carcass weights are included, shows that inventory is not very current. That backlog of cattle is likely to result in a marketing problem very soon unless feedlot managers are able to clear some cattle out. If inventory levels continue to grow, at current weak demand levels, it will be difficult for the industry to catch up, as carcass weights will continue to suppress demand for fed cattle.
There was some good news in the fed cattle markets last week as export shipments saw some improving activity. Last week’s reported export sales were also rebounding with net sales of 10,700 metric tons, a marketing year high, reported by USDA. Much of the trade was destined for Mexico, which received 5,300 metric tons, however, Japan was also a big buyer, receiving 2,200 metric tons.
On the CME, contracts traded in tandem with the equity markets for most of the week, benefitting last Thursday from a solid early day jump in the stock market. Cattle contracts were higher across the board at midday with February adding 35 points to trade at $82.30 while April tacked on 60 points to trade at $85.45 and June gained 52 points to reach $83.47. The concern among analysts is that with commodity and equity markets trading in tandem, the stock market weakness will serve to limit any significant seasonal advance in prices that the industry typically sees moving toward late spring. However, if the equity markets do begin to recover, it could serve to improve beef prices significantly. Beef purchases among consumers have been limited, in part due to psychological reasons as they feel more impacted by the economic downturn. A change in that mentality could serve to increase beef prices quickly.
Feeder cattle prices continued to seesaw last week as feedlot buyers cope with losses, which in some cases, are now between $200 and $300 per head. Until grass begins to come on in most of the country, gains will be limited as buyers are being far more cautious this spring as a result and only paying up for the best kinds. The large early supply of wheat grass cattle has also factored into the discounts in parts of the southern Plains last week. That said, there was slight improvement in some markets last week as futures prices rose, Vetterkind noted last Thursday.
"The feeder cattle market continues to trade on the defensive, however, as we enter the last half of the week, losses are beginning to moderate with some sales such as Kearney, NE, calling their market steady," he noted. "El Reno, OK, had 5,500 head of cattle on offer yesterday and they actually called their market $2-$4 higher with instances of $5-$6 higher on the better cattle. Buyer demand at all sales (last Wednesday) was described as good."
Elsewhere in Oklahoma, things weren’t as good for early week sales. Last week’s sale at the Oklahoma National Stockyards in Oklahoma City offered 8,802 head for sale where feeder cattle and calves were $4-8 lower. Most late trade was $4-8 lower. Demand was moderate with some buying interests out of the market. Sharply lower futures on the CME during recent days were prompting a number of buyers to stay on the sidelines, affecting the cash market.
The Joplin Regional Stockyards near Joplin, MO, reported receipts of 6,030 head last week where steers and heifers under 700 lbs. were $2-5 lower, with weights over 700 lbs. falling $5-7 lower. Demand was moderate to light for the moderate supply. The local cash market was responding to lower fed futures and cash trade, as well as the negative news on Wall Street.
Last week in McCook, NE, at the Tri-State Livestock Auction, a total of 1,700 head were offered for sale. Compared to the previous week, steers and heifers trended fully steady to $4 lower. The lighter, grass-type calves traded more so at the fully steady level. Demand was mostly moderate, as was trade activity.
A total of 3,413 head were received last week at the Bales Continental Commission Co. in Huron, SD, where feeder steers sold steady to $2 higher and feeder heifers sold steady to $3 lower. Demand was good, with many load lots in the offering.
The Winter Livestock Auction in Dodge City, KS, reported receipts of 1,024 head last week where feeder steers and heifers under 600 lbs. were mostly steady, with weights from 600-700 lbs. moving $1-2 lower. Yearling feeder steers sold steady to $1 lower in a light test. Yearling feeder heifers were too lightly tested for a comparison. Demand was moderate to good for calves.
Last week’s sale at the Riverton Livestock Auction in Riverton, WY, offered 2,434 head for sale where feeder steers were mostly steady, with instances of $2-3 lower compared to the previous sale. Feeder heifers were under pressure, with weights under 600 lbs. going $4-6 lower, with instances of $5-6 lower. The only advances on heifers were for those weighing 600 lbs., which sold $4 higher.
There were 1,860 head available for sale last week at the Miles City Livestock Commission in Miles City, MT, where feeder steers under 550 lbs. sold mostly steady. Weights from 550-724 lbs. sold $2-4 higher, while those from 550-675 lbs. sold steady to $3 lower. Offerings over 675 lbs. were not well tested. — WLJ