Fed cattle market steady to $1 lower

Markets
May 29, 2009
by WLJ

The fed cattle market traded steady to lower last week with early trade prices at $84 in Texas last Thursday, while cattle in Nebraska traded the prior day at $85 live and $135-136 dressed. Prices were steady to $1 lower than the previous week’s action.

A slight pull-back in the boxed beef markets last week served to limit enthusiasm among packer buyers despite a good production week following the Monday holiday which shuttered plants. For the week, the industry was expecting slaughter to reach 600,000 head, good volume for a short week. However, that translated into some pressure on beef prices. Last Thursday’s midday Choice product prices were down 70 cents at $146.14 while Select fell 6 cents to trade at $139.82. The middle meat complex was under pressure at midweek, Vetterkind Cattle Brokerage Analyst Troy Vetterkind said.

"Select and no-roll middle meats, in particular loins, were under the greatest pressure yesterday, however, Choice short loins and strip loins were trading higher. The end meats complex was trading mostly steady yesterday (May 27)," Vetterkind said. "There were a few instances of lower transactions on ground beef. Boneless beef markets were trading mostly steady. We saw an uptick in sales volume yesterday as some fill-in business was done from last weekend. This will likely taper off as we get closer to the weekend, and cutout values could sag as a result."

He said he expects beef prices to sag going into the first week of June as demand continues to be soft for the time being.

There was some good news in terms of an uptick in demand last week, according to Chicago Mercantile Exchange analysts Steve Meyer and Len Steiner, who noted that the National Restaurant Association’s national survey of restaurant owners turned in better results than those seen recently. They said that 52 percent of quick serve restaurants reported improved April 2009 sales results over April 2008 levels. Likewise, 5 percent more fine dining establishments also reported improving sales for April over year-earlier reports, although that particular segment of the restaurant industry, which accounts for a significant portion of middle meat sales, continues to be hard-hit by the downturn in consumer spending as people cut back on their spending.

The report is "better, but still bad," according to Meyer and Steiner. The two also pointed out that much of the trading down, while hurting the fine dining segment isn’t helping the "quick casual" restaurant segments which reported no increase in sales and in fact, 9 percent more operators in this category reported declining sales, meaning that the trading down in diner preferences is probably only benefitting the "limited service" establishments where conditions appear to be best.

On the surface, the poll indicates that the restaurant industry continues to suffer. Until this industry segment begins to show significant improvement, it could serve to limit any rebound in middle meat prices and, consequently, increased fed cattle prices. On the other hand, there is also some good to be found in the report. The demand for ground beef and some of the new value cuts being used by the chains where sales have improved has helped to support cow beef prices and some of the end meat complex. Dairy cow slaughter is set to increase over the next several months as the producers involved in the buyout ship their cattle. The strong demand for these products will help to lessen the price impact on cull cow prices this summer and to a lesser extent on fed cattle prices.

Feeder cattle

Vetterkind reported last Thursday that although many large feeder cattle markets were shuttered last week for the Memorial Day holiday, prices in later week sales were good on the limited offerings.

"Feeder cattle carried a mixed tone, with good demand and $2-$3 higher pricing noted on lightweight grass cattle and steady to $1 lower being noted on the heavier yearling cattle," he said.

The start of the big summer video auction sales is at hand and the industry will be paying close attention to the first offerings of the year which, in recent history, have set the tone for fall prices. The early sales traditionally set some of the top prices of the year and this year is expected by many to be no exception as corn prices look set to rise. The early sales definitely bear watching this year as they could determine the trend of the market, particularly with numbers expected to be tight.

The supply of yearling cattle continues to be seasonally very tight and numbers of cattle suitable for grass are also low as most calves have already made their way to market. The continued decline in cowherd numbers has left many buyers scratching to put together loads of cattle this spring, particularly with the good start to grazing many areas have experienced so far this year. The southern tier has had ample moisture over the past few weeks and although cool, wet weather has delayed good growing conditions in the north, green-up is underway now, improving demand in auction markets there as well. Last week in Torrington, WY, feeder steers and heifers were reportedly selling steady to higher than the prior week with good demand noted with 400-500 lb. steer prices in the $115-125 range, while 500-600 lb. offerings sold in a range of $115-123.

In Vale, OR, last week, the market was reportedly softer for calves in the 400-500 lb. class. Those cattle sold in a range of $103-188 with the market top reported at $120. Heifermates sold in a range of $97-106. Good demand was noted on the 600-850 lb. yearlings on offer which sold in a range of $102-114 with a top of $116 on the 600-700 lb. class and $94-102 with a top of $103.25 on those in the 700-800 lb. range.

In the Southwest, in Prescott, AZ, the market last week was slightly lower with a small run of cattle reportedly selling $3-5 lower on steers and heifers. Yearlings were reportedly $2-4 lower at the sale. Meanwhile, at Cottonwood, CA, last week, Light calves were called $2-5 lower, however, yearlings broke the trend and sold $2-3 higher than the prior week. Representative sales at Cottonwood for cattle in the 600-650 lb. class were in a range of $92-106 while 650-700 lb. steers sold in the $88-106 range. — WLJ

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