Fed cattle prices rise
Fed cattle prices rise
Some early fed cattle trade last week added $1 to the previous week prices in Nebraska where a handful of cattle traded to a regional packer at $131 dressed. A jump in cutout prices last week and a steadying of the futures market had analysts calling for trade steady to $1 higher than the prior week at $83 live and $131-133 dressed once prices were fully established.
Despite estimated packer margins in the red, an improvement in boxed beef prices last week after packers trimmed production helped improve sentiment slightly, allowing prices to rally slightly. Feedlot marketings remain sluggish although inventory levels remain tight, allowing some managers to cope with the trend. However, industry analysts continue to caution the industry about the need to remain current. Seasonal record high carcass weights are causing concern because the additional weight allows packers to produce more beef with fewer cattle, allowing them to trim their buying needs each week. If inventory begins to back up as consumer demand falls, it will create problems later in the year as market-ready cattle numbers begin to increase.
Consumer demand continues to be sluggish for beef and despite the improvement in cutout prices last week, movement was very light with just 123 loads trading hands last Wednesday. Thursday midday prices for Choice boxed beef were called slightly lower at $135.43 while Select was up 39 cents at $133.87 on movement described as very light. Consumer demand concerns were highlighted last week by the Federal Reserve’s Gross Domestic Product projections for the quarter which showed a sharp drop in annualized spending for food spending. According to the preliminary government numbers, consumer consumption of food products will drop 14.8 percent for the year at the current rate of decline, contributing to the projected gross domestic product decline of 6.2 percent for the year. That drop is the largest since the numbers became available in the early 1990s.
As consumers continue to feel pinched, they are trading down in their purchases and eliminating nonessential purchases when they can. That trend will continue to limit upside potential for protein prices in the months ahead until consumers regain some of their lost confidence in the economic outlook. The result will make it difficult for beef prices to make substantial gains in the interim.
On the other side of that coin, the strong prices available in the cow beef markets remain despite a spike in cow slaughter. As the turndown depresses dairy prices, the number of dairy cattle bound for harvest has grown to levels nearly 14 percent above a year earlier. For the week ending Feb. 14, the latest figures available, cow slaughter was estimated at 128,100 head, well above the same period in 2008.
Likewise, imports of cows from Canada for slaughter are also up 34 percent from last year, although overall numbers remain very light, accounting for just 8 percent of all U.S. cow slaughter, according to USDA. The increase in dairy slaughter numbers have been somewhat limited by a much smaller increase in beef cow slaughter, however, demand for ground beef and cow cuts has offset much of the increase in production. Consumer trends have favored the lower priced cow beef products as well as the end meats fabricated from steer and heifer slaughter.
Cow beef prices, although somewhat below year earlier levels, are not showing near as much decline as steer and heifer boxed beef prices, and auction market prices for cull cows, particularly the better kinds, remains at or just slightly lower than a year ago and may increase some as volume drops off seasonally. Last week, the cow beef cutout stood at $105.98, down 12 percent from the same date in 2008. The 90 percent lean stood at $132.92, down 11 percent from last year, and the 50 percent trim was trading at $88.81, up more than 16 percent from the same date last year. Perhaps more encouraging was the fact that movement and demand for cow beef products and trim has been described as good for several weeks.
Cash feeder cattle trade generally took a step in the right direction last week, with higher prices being paid at most auction markets around the country. Attitudes of feeder cattle buyers seem to be improving, though the positive trend has not been without a number of bumps along the way.
The futures markets were off and on throughout last week but generally trended downward as they followed fed cattle trade, pushed lower by general economic woes. Losses on Wall Street have contributed to growing fears that the economy is not going to turn around anytime soon, and notable investors and government officials have said it may take anywhere from one to three years at the minimum for a significant turnaround to occur.
Thus, the beef markets continue to be battered by tanking consumer confidence and until those indicators turn northward, the live and feeder cattle markets are likely to stay in somewhat of a slump.
Helping the feeder cattle market, however, is the extremely tight supply of feeder cattle, which is at historical lows. Last week, feeder cattle moved about $3 higher on average as many market watchers have noted that availability is soon to become an issue, especially as feedlot inventory becomes more current. Sellers are also pricing their cattle more aggressively, which some analysts believe is helping contribute to the more enthusiastic trade.
Placements are up, but recent reports indicate that a large percentage of the higher placements is due in part to drought conditions in the southern Plains causing an early movement of feeder cattle off of valuable wheat pasture before any damage is done due to overgrazing. Early withdrawals are contributing to lighter placement weights, and live cattle marketing could later show signs of this in the form of greater weight spreads.
Feedlots in the major feeding regions from Texas to Nebraska appear to be mostly full, showing that managers are intent on keeping yards full, especially with good weather. Most areas have had dry winters, leading to better than average gains and encouraging buyers to seek out extra feeder cattle and keep them on feed longer, notes USDA Market Reporter Corbitt Wall.
"Feedlots in this region have been waiting on a fed cattle market recovery and have held cattle longer than usual, plus this year’s open fall and winter weather resulted in outstanding cattle performance. The average weekly steer carcass weight has only dipped below 850 pounds once in the last six months, compared to the five-year average weekly weight of 825 pounds," said Wall.
Analysts have also noted that feeder prices have been quick to respond to and take advantage of any daily gains in fed cattle prices, though calf prices have suffered slightly in comparison to yearlings as a result of upticks in grain prices.
Last week’s sale at the Oklahoma National Stockyards in Oklahoma City saw a total of 10,090 head offered where feeder cattle were $1-4 higher. Stocker cattle and calves were $3-6 higher, with demand improved from the prior week. Cattle futures were sharply lower on sale day and buyers were somewhat cautious. Feeder cattle continued to come off of short, dry wheat pasture, but several lightweight stockers were available as well.
The Joplin Regional Stockyards near Joplin, MO, reported receipts of 4,645 head last week where steers under 600 lbs. and heifers under 500 lbs. sold $2-5 higher. Steers over 600 lbs. and heifers over 600 lbs. were steady to $2 higher following the previous week’s sharply lower trend. Demand was moderate to good for the moderate supply. The bulk of the calves and yearlings were in medium to thin flesh. Demand was best for calves suitable for summer grazing.
A solid offering of 4,104 head was seen last week at the Winter Livestock Feeder Cattle Auction in Dodge City, KS, where steers from 400-750 lbs. were $3-5 higher in a limited supply. Weights from 750-1,000 lbs. were steady to $2 higher. Heifers from 500-650 lbs. were $2-4 higher in a limited supply, while those weighing 650-950 lbs. were $1-3 higher.
The Tri-State Livestock Auction in McCook, NE, reported receipts of 1,200 head last week where steers and heifers trended $1-5 higher. Demand was moderate to good and there was active trading on grass-type calves.
Last week’s sale at the La Junta Livestock Commission in La Junta, CO, had a total offering of 3,857 head where feeder steers were steady to $1 higher, except for those weighing 700-750 lbs., which were $3 higher. Feeder heifers were steady to $1 higher except weights from 400-500 lbs. which sold $3 higher.
A total of 2,515 head were offered last week at the Miles City Livestock Commission in Miles City, MT, where feeder steers and heifers under 700 lbs. sold mostly $2-5 higher, with instances of $5-10 higher on stocker steers weighing 500-550 lbs. All other weights were not well tested. — WLJ