Early fed sales move lower
Early fed sales move lower
Cattle feeders came to the table early last week and moved light numbers of cattle at prices steady to $1 lower than the previous week at $83-84 live basis last Wednesday in the South and at $130-132 dressed in the northern tier and Corn Belt. The trade was somewhat surprising as a result of the sharply higher cutout which came as a result of lower production over the previous week. The boxed beef cutout moved $1 or more higher each day last week with the Choice product trading at $143.15 and the Select at $136.79 at midday last Thursday, an increase of $6-7 from a week prior.
Analysts predicted that the early trade developed as a result of some showlist carryover from the prior week and a lower live cattle contract price on the Chicago Mercantile Exchange (CME).
"The carcass weights this week are moving higher, so the late trade last week probably resulted in some heavier cattle that needed to be sold earlier this week," said Livestock Marketing Information Center analyst Erica Rosa. "There may also be some pens of cattle that are being sold to clear the way for feeders to roll cattle back to hit the October contract premiums that may be playing into the early, lower trade this week as well."
The rise in boxed beef prices last week helped add to packer margins, which Rosa predicted could help cattle feeders increase leverage, moving fed cattle prices higher the following week or two. Whether packers are able to maintain the cutout prices for long remains to be seen; she pointed out that packers had already increased production levels. By midweek, production was already 2,000 head more than the same period a week earlier at 496,000 head and movement of boxed beef product was light with just 100 loads of fabricated product trading hands at midday last Thursday.
"The boxed beef movement this week has been relatively thin, in terms of volume," Rosa pointed out.
Cow beef markets also appeared to be topping out last week as the industry begins to prepare for a second round of dairy buyouts, with cows coming to market in August. Cull cow prices have remained generally strong with most markets in the $48-52 range, however, those prices are expected to come under pressure as more dairy animals are sold as part of the Cooperatives Working Together buyout which has an end-of-July due date for bid submission. The steady consumer demand has helped the cow beef markets continue strong despite the added production this year. Combined with the reduction in steer and heifer slaughter by nearly 1 million head, cow beef prices have remained solid for most of the year. Last week, the cow beef cutout stood at $111.56, just $1 lower than the previous week’s level. The 90 percent lean was $141.56, down $2 from the previous week, and the 50 percent trim product was trading at $74.18, an increase of $3 from a week earlier.
Rosa said the cattle on feed report and the semi-annual cattle inventory numbers had been largely factored into the market last week, although she noted that there could be some surprises in the cattle on feed report in terms of placement numbers which are expected to come in well below last year’s level. The average estimate of analysts ahead of the report showed that placement numbers are expected to be down 7-8 percent from last June, with some analysts predicting that placements could fall as much as 12-15 percent for the month.
Rosa said the industry will also closely watch the semi-annual inventory report for calf crop numbers, which will indicate the supply of cattle available for feeding over the course of the next year along with the retained heifer numbers, as the industry looks for any sign of expansion in the near future. Rosa said the trade is looking for the calf crop number to be down 1.5 percent from July 1, 2008, while retained heifer numbers are also predicted to be lower, with the average analyst estimate predicting a decline of 2.2 percent from a year ago.
Lower corn prices have helped spur buying interest and cattle feeders are stepping into the market to lock up calves for fall placements, both in the direct trade and on the video sales. Prices have been slightly lower than last year, but still mostly respectable in light of the massive losses in the cattle feeding sector over the past two years. Fall calves have been commanding prices which are only slightly lower than last year. CME contract prices closed last Thursday at $102.40 on the October contract, while November ended the session at $102.25. Omaha cash corn prices under the $3 per bushel mark have many feedlots looking at more respectable cost of gain which may allow some opportunity to lock in profits, making feeder cattle a more attractive prospect.
However, there was some concern last week as USDA announced it intends to re-evaluate the actual corn plantings in several states due to weather concerns earlier this year. Their attempt to reach a more accurate number for actual planted acres caused some in the industry to speculate that corn prices may be headed higher in the near term. The thinking is that actual number of acres planted may be below what USDA initially reported, meaning that the expected bumper crop of corn this year may not materialize as had been previously expected. That caused an increase in contract corn prices last week. On the Chicago Board of Trade last Thursday, December corn contracts were up 19 cents at the close, ending at $3.38 a bushel.
Cash feeder cattle auction markets last week were seasonally light in their number of receipts and many markets were either dark or reporting numbers too light for a trend. In the large markets in Dodge City, KS, steers in the 650-1,000 lb. range were called firm to $2 higher last week, with the best price action coming on the heaviest weights. Heifers in the 650-950 lb. class were steady to firm and steers and heifers under 650 lbs. were steady to slightly lower.
In Oklahoma City, OK, last week, feeder cattle and calves sold steady on good demand for all classes of cattle. Meanwhile in Joplin, MO, optimal conditions, including good grass, lower corn prices and full hay barns coupled with moderate midsummer weather, sparked renewed buying interest last week. Steer and heifer calves under 600 lbs. sold $3-5 higher at the sale. Steers and heifers over 600 lbs. were called steady to $2 higher with good demand and moderate supply noted.
On the West Coast in Turlock, CA, prices were lower on nearly all classes of cattle as seasonally dry conditions and warm temperatures decreased interest for middle weight cattle. Steers in the 500-800 lb. classes were $2-6 lower, with the lighter weights faring better while heavier 800-900 lb. steers sold steady in a range of $88-94. Heifers were lower, with most classes down $3-4 from the previous week’s strong sale. In Madera, CA, stocker and feeder cattle were reportedly mostly steady in a light test.— WLJ