Tight feeder cattle numbers boost prices

Markets
Jul 10, 2009
by WLJ

Tight feeder cattle numbers boost prices

There was light trade dressed cattle reported last Wednesday to regional buyers in Nebraska and the western Corn Belt at $1.30. However, the action was slow to develop elsewhere as packers worked to ratchet down production in the face of light buying interest at the retail level. For the week, trade was expected at $82-82.50 live basis in the southern Plains and at $129-130 dressed in the North, down $1-1.50 from a week earlier.

Prior week prices were at $83.50 in Texas, while Kansas feedlots sold cattle at mostly $83 with some dressed trade at $130.50 while Colorado and Nebraska sold dressed cattle at $131 with live sales at $82-83.50 in Nebraska and at $83 in Colorado. Corn Belt sales were from $82-82.50 and dressed sales came between $130 and $132.

Packer margins have been slipping in recent weeks as retail sales remain soft. There was fair clearance over the holiday weekend and some early week fill-in business was reported, but interest quickly backed off. Likewise, forward purchases have seen limited interest according to Vetterkind Cattle Brokerage analyst Troy Vetterkind. He noted that beef buyers are taking a wait-and-see approach to purchasing, waiting for consumers to come to the table. Until then, Vetterkind noted, purchasing by retailers is likely to be a hand-to-mouth affair. Slaughter for the week was expected to hit 650,000 head, well below last year’s level. However, the packer’s reduction in harvest did serve to throw some support under boxed beef prices last week. Thursday, Choice prices were down 14 cents from the prior day at $138.31 while Select was up 4 cents at $132.67 on light to moderate trade. Vetterkind noted that some cuts from the end meats could be headed for ground beef product as the number of cows headed for slaughter tapers off following the end of the most recent dairy buyout. The lack of available cow beef has lent some buying support for lower-priced cuts from the steer and heifer slaughter mix. Last Thursday’s cow beef cutout was also seeing some boost as a result of the lack of supply. The cutout stood at $113.19 while the 90 percent lean product reached $142.80 and the 50 percent trim sold at $67.43. The gain in grind product added $2 and in some instances more to the slaughter cow and bull markets in most areas last week. Vetterkind said he expects that trend to continue for the next few weeks.

The release of the semi-annual cattle inventory numbers on July 24 are expected to show a sharp drop in U.S. cattle numbers which could help further the price increase in the cow beef and slaughter cow markets. According to Livestock Marketing Information Center (LMIC) the number of beef cows in the U.S. is expected to fall 1.4 percent in the first six months of the year from 32.75 million head to 32.3 million head when the numbers are released. Likewise, dairy cow numbers are expected to fall 1.6 percent from 9.25 million head to 9.1 million head as a result of the negative margins in the dairy industry which prompted widespread culling and liquidation in that sector. The strong demand for ground beef has limited the impact of the significant cow slaughter numbers and should continue to do so, seasonally, for the remainder of the year as consumers seek lower-priced alternatives to more expensive middle meat items.

The decline in beef cow numbers isn’t expected to turn toward positive levels this year as LMIC predicts that heifers 500 lbs. and heavier will fall to 250,000 head, a decline of 1.5 percent, signaling that producers remain unlikely to increase herd size in the year ahead due to challenging market conditions.

Feeder cattle

The cattle inventory report which is expected to show declining cow numbers is also expected to show a sharp decline in calf crop for the year. LMIC analysts estimate that this year’s calf crop will fall from 36.113 million in 2008 to 35.6 million in 2009, a drop of 1.4 percent, mirroring the drop in beef cow numbers. The already tight supply of feeder cattle has helped to support feeder cattle prices above what had been expected as feedlot buyers compete for the dwindling numbers of available cattle. The desire to retain calves to heavier weights before selling has also cut into supply and added to pricing gains for the past year. That trend is likely to continue, particularly if ethanol production increases cut further into the corn supply, causing prices to increase. For the time being, the slumping price of crude oil is likely to limit the gains in the corn market.

Attention last week was focused on the big Superior Video Auction, Weekend in the Rockies, broadcast from Park City, UT, where more than 270,000 head were on offer. Cattle from all regions found good prices at the sale with the best interest coming on yearling cattle for immediate delivery. Prices for 550-590 lb. steers in the southern Plains brought a range of $94.50-119 while 650-695 lb. cattle sold from $92-110. In the North, steers in the 550-580 lb. range sold from $95 to $113 while heavier 650-685 lb. calves sold between $93 and $102.25. West Coast sales for 550-590 lb. calves brought $94.85-112, while 650-675 lb. cattle sold from $93.50 to $105.

The upcoming Western Video Market (WVM) sale in Reno, NV, is also expected to post good numbers of quality cattle and calves on offer. The consignment numbers caused WVM to add one additional sale day in order to accommodate the offering.

In auction markets elsewhere, volume was extremely light last week with many markets closed following the Fourth of July holiday. In Joplin, MO, last week, steers under 800 lbs. sold steady to $1 higher while heifers under 650 lbs. were called $2-3 higher. Steers over 800 lbs. and heifers over 650 lbs. were $2-4 higher last week with the demand called moderate to good, while supply was reportedly moderate.

At the sale in El Reno, OK, last week, a larger-than-expected run of feeder steers and heifers sold steady to $2 lower on good demand. Steer calves sold $1-3 higher, while heifer calves were called steady to $2 higher on very good demand for calves.

On the West Coast at Galt, CA, the market for feeder steers and heifers was reportedly very good last week with prices reported steady to $5 higher for all weight classes. — WLJ 

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