Fed cattle steady to higher
Fed cattle steady to higher
shows signs of life.
Fed cattle markets looked to be moving higher again last week as market analysts predicted late week trade would come at prices $1 above the previous week when trade unfolded. A strong late-winter storm predicted for the southern Plains had feedlot managers sticking to prices in the $85 range, and analysts called for trade in a range of $83-84 live and $133-134 dressed when it finally got underway last week, prices which would be steady to $1 higher than the prior week’s trade.
Boxed beef prices were steady for most of last week, with the Choice/Select spread remaining in a very narrow range as production of Choice carcasses remained elevated near 66 percent of the slaughter mix. Until that percentage begins to slide some, analysts said the spread would remain tight. In fact, early last week, the spread was inverted, with Select boxed beef trading above Choice product. At midday last Thursday, Choice product was trading at $135.64 while Select stood at $134.57, with movement reported as moderate with 200 loads trading hands.
Slaughter levels last week were in line with the previous week, with a 615,000 head kill predicted. Industry analysts were reporting last week that some packers were planning to reduce production in the week ahead in an effort to help boost margins. HedgersEdge.com estimated packer margins in the red, with losses of $44.75 per head last Thursday.
There were signs of life last week in the equity markets with a sharp rally on Wall Street last Monday helping indexes to post 20 percent gains off their early March lows. The improving sentiment, a better than expected cattle on feed report, and signs of an uptrend in the markets helped spur optimism in the commodity markets as well last week, said Virginia Tech Extension economist Mike Roberts.
"USDA’s Cattle on Feed report ... showed lighter-than-expected February placements and feedlot supplies at their lowest levels in four years," he said. "Fund buying on strong Dow performance and rising crude oil prices was supportive (of futures markets)."
He pointed out that the supply for the March 1 report put inventories at their lowest levels seasonally since 2005, which helped add strength to cash markets. However, he pointed out that there was a possibility of some pull back in prices from current levels and not just in the beef markets.
"Packers continue to have a hard time finding profitable margins. There are news reports of slowing processing lines soon," Roberts said. "Feed buyers should hold off on purchases at this time as current corn prices have a good chance of deflating."
The sharp rally in corn prices was a result not just of the normal spring battle for acreage between corn and soybeans, but also because of the improving fundamentals in the ethanol markets and gains in export shipments as the U.S. dollar slips, making foreign purchases of U.S. product more attractive to buyers. Chicago Mercantile Exchange corn contracts last Thursday were trading close to the $4 mark for the first time this year, with deferred months above that level. At midday, prices were higher across the board, with May contracts at $3.88, while July traded at $3.98. September hit $4.08 while December corn contracts jumped to $4.20, and 2010 and 2011 contracts posted sharp gains which put them near the $5 mark.
However, despite the gains in the market, which were helped by the improvement in the crude oil markets and positive sentiment among hedge fund buyers for the first time in quite awhile, Roberts said the rally could be short-lived.
"One floor source said it best, ‘If we get a big jump this week, people are going to take the money while it lasts. It’s very risky at this time.’ The time to get your old crop corn sold is NOW as this sales window is not expected to last," Roberts said. "It is a very good idea to get the ’09 crop priced to 45 percent if you haven’t done so already. Feed purchasers should wait at least another week or two to buy."
Stocker cattle which are in thin flesh and those cattle suitable for grass turnout have been in high demand in recent weeks, going as much as $5 higher in certain areas. The rise is especially notable when compared to feeder cattle which have enough weight and flesh to be bunk-ready. Those cattle have steadily risen about $3 higher each week for the past few weeks.
Sharp losses on closeouts have mostly been shrugged off by feedlot replacement buyers who seem intent on competing with Midwest farmer-feeders for cattle. Many farmer-feeders in the Corn Belt have large supplies of damaged corn to feed to the cattle and may be able to pencil in a profit.
Larger feedlots, on the other hand, have been betting on reduced supplies of beef cattle to turn their losses around, although live cattle futures aren’t supporting the math at this time. With optimistic feed yard managers and cattle-hungry stocker operators present, there’s no shortage of demand at this time.
Recent weather has been kind to those hoping to turn cattle out on grass in many areas, as moisture in the form of rain and snow on the Plains has helped alleviate some drought concerns. The southern High Plains still remain extremely dry, however.
Cattle were kicked off of winter pastures early in western Kansas, the Oklahoma and Texas Panhandles, Colorado and New Mexico. Most of those cattle were absorbed early and placed in pens, but a few still linger on the market as producers in those areas still hold out hope for moisture.
"Buyer demand appears to lie in the placing of cattle to the western and northern areas where ample winter moisture assures producers of good spring grass. The southwestern areas of Texas, eastern Colorado, Oklahoma and lower third of Kansas remain in a grass deficit due to the severity of the drought in those areas," noted DTN Analyst Walt Hackney.
Producers in major yearling grazing areas such as eastern Kansas, Oklahoma and Missouri are definitely present in the market and have drawn cattle in from outside their local areas.
"Feeder cattle demand progressively improved this week as weights became lighter and the option of inexpensive pasture gain was coupled with extended time for lighter supplies to be realized," explained USDA Market Reporter Corbitt Wall. "A flurry of new stocker interests entered the market this week in search of dry wintered longtime weaned calves or lightweight yearlings in ideal condition for grass."
Last week’s sale at the Oklahoma National Stockyards in Oklahoma City saw a total of 11,186 receipts where feeder cattle were steady to $2 higher except those weighing over 900 lbs., which were $1 lower. Calves and stocker cattle sold mostly $1-3 higher. Demand was good for all classes, especially for those suitable for grazing. The quality was noticeably lower with an increased percentage of No. 2 cattle in the mix. Several lots of plainer crossbreds and clean-up type cattle were in the offer.
The Joplin Regional Stockyards near Joplin, MO, reported receipts of 9,238 head last week where steers were steady to $3 higher. Heifers were steady to $2 higher with most of the increase on lightweight stocker calves and heavy feeders. Demand was moderate to good for the heavy supply. The bulk of the calves were weaned and in medium to thin flesh, with a few fleshy un-weaned calves in the mix.
A total of 3,809 head were offered last week at the Winter Livestock Feeder Cattle Auction in Dodge City, KS, where steers from 350-700 lbs. and heifers from 450-750 lbs. were $3-5 higher in a very limited supply. Steers from 700-950 lbs. were steady to firm, with instances of $1 higher on weights 850 lbs. and over. Heifers from 750-900 lbs. were steady to firm.
In Kearney, NE, last week at the Huss Platte Valley Auction, a total of 2,500 head were received for sale. Compared to the previous week, steers and heifers trended steady to $4 higher, with the most advance coming on 650 lb. steers which were up to $6 higher. However, 750 lb. steers were steady to $3 lower. Demand and trade activity was moderate to very good.
Last week’s sale at the La Junta Livestock Commission in La Junta, CO, offered 4,766 head for sale. Compared with the previous sale, steer calves rose $3, with instances of $5 higher. Heifer calves were $3-5 higher while feeder steers and heifers were $1-2 higher. Demand was noted as being good.
The Torrington Livestock Commission in Torrington, WY, reported receipts of 1,275 head last week where steers under 750 lbs. and heifers under 700 lbs. were $2-4 higher. Instances of $5-7 higher were seen on 400-500 lb. heifers, with demand being moderate to good for all classes.
A total offering of 700 head was seen at the Stockland Livestock Auction in Davenport, WA, last week. Feeder cattle sold steady, with instances of $1 lower on 500-600 lb. steers. Trade was active with moderate to good demand. — WLJ