Fed trade steady
Fed trade steady
Fed cattle trade started at steady money last week in most areas with initial trade at $84-85 live basis in Texas, Colorado and Nebraska. Early live sales in Nebraska were in the $135-136 range. Market analysts predicted trade would come in steady with the prior week at mostly $84-85 live and $135-138 when fully developed last week. Choppy trade in the contract markets had feedlots happy to settle for steady trade ahead of the holiday weekend. The spot-month June live cattle contract was trading higher at midday last Thursday, up 37 points at $82.60.
The production last week was running well above last year’s level as packers worked to fill a few last minute needs ahead of the holiday weekend. For the week, industry analysts were looking for a 670,000 kill. There were a number of decent beef features nationwide and retail demand appeared to be moderate ahead of the holiday. However, most buyers were on the sidelines until final demand could be tallied. If clearance does not meet expectations, it could cause a softening in cutout prices until the supply pipeline can be cleared. Conversely, if retail sales come in better than expected, it will serve to support beef prices, which would also help support live cattle price action in the week ahead. Last Thursday though, middle meats were under pressure as buying interest dropped off. The Choice boxed beef values were down at midday last Thursday, trading 80 cents lower at $82.60 while Select was down 24 cents at $141.87 on light to moderate movement of product.
Another factor likely to provide some market movement was last Friday’s cattle on feed report, which some analysts expected to pressure the markets. Vetterkind Cattle Brokerage analyst Troy Vetterkind said the industry’s pre-report expectations for on-feed numbers for May 1 are 3 percent below last year’s level. However, he noted that placement numbers were predicted to be 6.3 percent above April 2008. Marketings are also expected to pressure prices, predicted to come in 5.8 percent below last April.
"The increased placement numbers is what has been pressuring the front month live cattle since last week and much of this should be priced into the August live cattle contract. Especially with August trading $5.62 under October," Vetterkind noted.
However, he predicted that for the week after Memorial Day, prices would move higher.
"For this reason, and because of the continued strength in the cash feeder cattle market, I will continue to view any 50 cents to $1 break in front month live cattle and feeder cattle as a buying opportunity," he said. "I would continue to look at buying August and selling October on any further weakness as well."
Although the short-term predictions for beef prices remain on the volatile side, the long-term prospects appear good for beef producers. USDA’s recent release of production expectations show the government predicts a decline in beef production of 2 percent in 2010. University of Missouri agricultural economists Glenn Grimes and Ron Plain said last week that they expect a 2 percent drop in production coupled with stable or rising demand should pave the way for higher prices for beef and fed cattle.
They noted that export markets continue to rebound, which is supporting current prices, and if market conditions persist, growth in exports in 2010 will only serve to add to any price gains in domestic sales. For March, they said beef exports rose 5.2 percent from March 2008.
"Beef and veal exports for January-March 2009 were up 6.6 percent from a year earlier. Beef imports for January-March were up 10.4 percent from last year," they said. At the same time, they also noted that net imports of beef as a percent of production are also up for the first quarter of 2009, rising 5.22 percent, which was up from 4.35 percent of production in 2008, or an increase of 20 percent. Some of that increase is the direct result of strong demand for ground beef among U.S. consumers. That demand continues to support cow prices, despite strong production in the cull cow segment where slaughter numbers continue to trend above last year as a result of the sell-off of dairy cattle. Despite the increase in cow numbers, prices remain very strong. Last week, the cow beef cutout stood at $116.57, down $16 from last year’s record levels. The 90 percent lean traded last week at $149.49 while the 50 percent trim price is $5 higher than last year at $79.25.
Feeder cattle markets last week continued to improve with pasture and range conditions which were benefitting from widespread precipitation. Pasture conditions are slightly better than last year, according to USDA’s first report of the season. As of May 1, 20 percent of pasture and range in the U.S. is rated poor or very poor, a 2 percent improvement from the same date in 2008. Almost half was rated good or excellent. The southern Plains region has some of the worst ratings as a result of a lack of winter and early spring moisture. There, 30 percent of pasture is rated poor or very poor, according to the Livestock Marketing Information Center, a 10 percent decline from last year.
"Among the other regions, the Western Region reported about a quarter of pasture and range was in the worst two categories, much better than last year when it had 35 percent classified in those categories," LMIC analysts noted. "The Cornbelt, which has benefitted from plenty of moisture this spring, reported poor to very poor conditions at 8 percent versus 11 percent last year, while conditions in the Great Plains were reported at 15 percent poor to very poor, down from the 27 percent at this time last year."
That slight uptick in pasture conditions has helped to fuel spring feeder cattle prices at auction markets nationwide. With feeder cattle numbers down and continuing to trend lower, buyers have had to work harder to gather numbers to meet their needs in some cases. The drop in fuel prices this spring has also helped, particularly in West Coast markets where basis levels have dropped along with diesel prices.
The decline in calf numbers domestically has coincided with a shortfall in the number of imported feeder cattle this year. The implementation of Country of Origin Labeling requirements has buyers backing away from feeder cattle of Canadian or Mexican origin until the rules and their impact are clearly understood. That has resulted in a drop in prices for imported cattle and an overall decline in numbers. Feeder cattle imports from Mexico during the first quarter were up 39.1 percent, however, cattle imports from Canada were down 26.9 percent from a year earlier. Total cattle imports for the first three months of 2009 were down 10.3 percent from 2008, according to USDA data.
In cash market trade last week at Oklahoma City, OK, a run of more than 11,000 head sold steady after opening lower on the feeder steers. Feeder heifers were called steady to $2 higher. Stocker cattle and calves sold steady to $2 higher. Demand was called good for stockers and moderate for feeder cattle. The week’s supply included a large set of fancy reputation calves and these sold to very good demand.
In West Plains, MO, last week, steers and heifers were steady to $2 higher with the full advance on yearlings, although most 550-650 weight heifers sold $2-4 higher, according to market reports. Supply was called moderate with good demand. Buyers turned fairly aggressive and remained so throughout the day, the market reported.
In North Platte, NE, comparable offerings were too few to make an adequate market comparison although the few comparable offerings were $4 to $6 higher with instances of $8 to $10 higher. The quality of the day’s offerings was called outstanding, with exceptional demand noted for all classes and weights. Meanwhile in Billings, MT, stocker and feeder cattle sold unevenly steady with light feeder cattle trending $1-4 higher and heavier feeders steady to $3 lower.
On the West Coast in Galt, CA, feeder steers and heifers under 700 lbs. were steady to $5 higher during the special feeder cattle sale two weeks ago. Feeder steers and heifers over 700 lbs. were steady on a run of nearly 3,000 head. — WLJ