Fed trade fully steady

Jun 19, 2009
by WLJ

Fed trade fully steady

With the exception of moderate dressed trade in the Corn Belt last week, fed cattle trading was slow to develop. Last Thursday, some cattle traded in the region at $129-130 dressed basis with a few as high as $131-132 dressed in Nebraska. Trade in the south was expected to hold off until after the release of the monthly cattle on feed report last Friday as both sides appeared willing to hold out for a better offer. When it developed, trade was expected fully steady with the previous week and if the boxed beef cutout or the futures market were able to trade higher, cash prices were expected to follow, analysts noted last week.

The boxed beef markets have been showing better than expected resiliency, Vetterkind Cattle Brokerage analyst Troy Vetterkind noted last week. That relative strength has helped to improve the position of cattle feeders and been supportive of prices. He said he expected that trend to continue as retailers gear up for Father’s Day and the Fourth of July holidays with an eye on middle meats and grinding product.

"The beef market is acting better than I thought it would this week. Retail interest for beef has improved as they have been hand-to-mouth with their procurement of beef the last several weeks and they now need product ahead of the holidays," Vetterkind said. "This will likely be supportive to the cutout market into the first of next week as there will likely be some fill-in business after this weekend. There has also been active forward sales being done in beef, which will be supportive into the middle of July, at which time slaughter numbers will start to decline."

He said that until then, he expects mostly steady prices over the next several weeks.

"Once we get into the middle of July, both fed cattle and cow slaughter numbers will begin to decline rather precipitously and this is likely when we will see the beginnings of our fall rally in beef prices," he said.

Last week’s slaughter was expected to top 670,000 head, slightly ahead of the prior week’s production. Despite the increased volume, boxed beef prices were only slightly lower last Thursday with Choice product falling 53 cents to trade at $139.90 while the Select dropped 63 cents to trade at $133.30.

Cow slaughter volume continued to rise last week as the number of dairy cattle moving into the market stream grows. Weekly dairy cow slaughter was reported at 60,800 head last Thursday, up from 45,100 head for the same period last year. However, despite the increase, cow beef prices remain relatively strong as a result of strong demand for ground beef in the retail and restaurant segments. Despite the near-term strength in cow prices, last Thursday, the cow beef cutout price stood at $107.74. The value has moved sharply lower from last year’s levels when volume was low and demand was high. There was also less grinding beef being imported last summer, which caused cow prices to spike above $131 during the same week last year. Likewise, the 90 percent lean has also dropped from year ago levels of $167.16 to $133.16 last Thursday. The 50 percent trim fell from $92.77 on June 23, 2008, to $67.50 last Thursday.

Feeder cattle

The feeder cattle market continues to show strength as feedlot buyers work to ensure inventory during the second half of the year ,Vetterkind said last week. Placements for the month of May are expected to show a sharp drop from year-earlier levels when the Cattle on Feed is released and analysts said that buyers are acting accordingly. There has been an anticipated shortage of calves this year as cow herds have been culled deeply over the past two years as a result of high input costs. The result has helped sustain calf prices in the cash markets this summer. Likewise, out front contracting and video sales have also seen solid support so far this summer. Although prices are down from the past two years, they remain strong. Superior Livestock Auction’s Lone Star and Gulf Coast Classic sale last Wednesday and Thursday sold 43,000 head of cattle with south-central region calves bringing good prices. Feeders in the 525-535 lb. class sold in a range of $95.85 to $105 while those in the 550-585 lb. range brought $88-109.25. Heavier steers in the 650-680 lb. range sold between $86 and $98.25 while 700 lb. cattle brought a range of $86-100.75. The next feeder cattle sale hosted by Superior will be a big one. The Park City, UT, auction is expected to span five days, July 6-10, with more than 300,000 head on offer, general manager Richard Stober told WLJ last week.

In cash auction markets last week, prices were mixed to mostly higher. In El Reno, OK, medium/large frame #1-#2 steers were called $2-4 higher than the previous week, bringing $95-106. In Oklahoma City, OK, last week, feeder steers sold steady to $2 higher. Feeder heifers were called $1-3 higher. Stocker cattle and calves were not well tested during the sale and no trend was available on those classes. Demand was reportedly moderate to good for feeder cattle, with the most bidding action on heavier weights.

Farther north in Hub City, SD, last week, feeder steers were selling steady to $2 higher. Feeder heifers under 700 lbs. were called $2-4 higher. Feeder heifers over 700 lbs. were selling steady with very good demand reported for lighter feeder cattle.

In Blackfoot, ID, last week, a light run of feeder cattle sold steady with the prior week with 500-600 lb. steers selling in a broad range of $101-121 while heifermates sold $8-10 back. Steers in the 700-800 lb. class brought $86-104 at the sale.

At the auction in Madras, OR, last week, a light run of cattle sold mostly steady with the prior week, with 500-600 lb. steers selling in a range of $100-105 while 600-700 lb. steers brought $102-110. Heifers of similar weights sold $5 back. Meanwhile, farther south in Famoso, CA, feeder and stocker steers were $2-3 lower although demand for the sale was called good. Five hundred to 575 lb. stocker steers sold in a range of $85-103.50 while heavier feeder steers in the 725-800 lb. range sold in a narrow range of $85-86.75. Eight hundred twenty-five to 900 lb. steers brought $80-81.50 at the sale. — WLJ