Fed trade steady following good Labor Day holiday sales
Fed cattle trade steady following
good Labor Day holiday sales
Fed cattle trade started steady in the Corn Belt last week in a full range of $129-131 dressed basis. Southern Plains traders were still a few dollars apart at midday last Thursday with trade expected to be no worse than steady with the prior week at $85 live. Packers were believed to be somewhat short on their cattle inventory after light volumes the week prior to Labor Day. With margins looking solid and boxed beef surging higher early last week after fair clearance the prior week, packers were expected by many to come to the table to fill their cattle needs before supplies grow any tighter, which should cause feedlots to raise asking prices.
Last Thursday, HedgersEdge.com estimated packers were making a profit of $22.30 per head. As a result of the strong margins and a need to refill the pipeline after good weekend sales in much of the country, packers had increased their production to make up for the holiday-shortened week. For the week through Thursday, harvest was estimated at 391,000 head, down from the full-production week prior total of 515,000 head. Market analyst Troy Vetterkind noted that the hide and offal price was also strong last week, which also added to the packers’ margins. The drop value last Thursday was up to $9.60 per cwt. The increase in hide and offal prices could reflect an increasing demand from leather users such as the automotive industry as Detroit manufacturers ramp up production following the government incentives offered for car purchases. It may also be the result of improved demand from shoe makers, a sign that consumers are coming back to the table, which will bode well for beef producers, particularly as the market moves seasonally higher amid already tight supplies of cattle.
The sharp slump in the U.S. dollar value is adding some support to the grinding beef market as well as it has made imported beef more expensive to processors, forcing them to source beef domestically instead, Vetterkind noted last week.
"Ground beef markets continue to receive a good call as retail accounts replenish supplies after the long weekend and food service business is said to have picked up. Because of this, we saw heavy movement of coarse ground product (last Wednesday) and ground beef will continue to be a good performer for both the packer and the retailer," he reported.
The result was a solid week for the cow beef markets and cull cow prices in most markets. The cow beef cutout last Thursday was up slightly from the previous day at $104.48. The 90 percent lean product traded higher at $129.64, as did the 50 percent trim at $58.94. However, those prices are well below last year’s phenomenal market for ground beef product when cow supplies were reduced. The flood of dairy cows coming to slaughter this year has taken much benefit of strong market demand away and caused prices to fall sharply from last year’s excellent levels. The cow beef cutout last week was fully $35 lower than the same date a year earlier as a result of both lower demand and the increase in numbers. The 90 percent lean product was more than $44 lower while the 50 percent trim was also $35 lower than last year. The result is a decline in cull cow prices in most markets of about $10-15 per cwt. The drop could become even more pronounced as beef producers cull cows this fall. Dairy cattle numbers will continue to run high for the next several weeks as the cows from the Cooperatives Working Together buyout come to market. There is also the possibility of another buyout before year-end if dairy price conditions don’t show signs of improvement, market analysts have warned. For the week ending Aug. 29, dairy cow slaughter was estimated at 64,400 head, representing 51 percent of the slaughter mix. The total dairy cow slaughter was up 8,500 head from the same period a year earlier, although total cow slaughter for the week was down 3,100 head from the same period in 2008.
The positive movement in the fed cattle market helped pave the way for gains in the feeder cattle market last week although the current price spread may limit any further gains for the time being. Last week’s contract trade moved mostly higher for the first half of the week before steadying some. Feeder cattle buyers may take a breather ahead of the big push of western calves coming to market later this fall to get a feel for where the fed cattle market might turn next. Reports from the country have indicated that some major feeder cattle order buyers haven’t even started filling their needs yet this year. That news could help to boost prices as tight supplies of feeder cattle meet with increased demand going into the fourth quarter of the year.
Buyer demand at auction markets and in video sales appears to be focused on cattle which have the potential to finish before the end of the year, and buyers have reportedly been bidding aggressively on cattle on offer over 750 pounds. Lightweight calves which have been preconditioned and can finish late in the first quarter of 2010 are also seeing some buying interest. Middleweights are finding the market a little softer, however, cattle which have been pre-conditioned, minimizing health concerns, are still selling steady at good prices in most markets.
Last week’s Superior Video Auction from Denver, CO, saw prices firm to higher for yearling cattle on offer after the contract market posted gains of 100 points and more last Wednesday. However, calf prices were slightly weaker than recent sales as buyers were selective on their purchases. Southern Plains steers in the 550-590 lb. class last Wednesday sold in a range of $89.50 to $109 while those in the 650-685 lb. range brought $86.50 to $102.50. Demand and prices were good for heavyweight steers in the 770-775 lb. class which brought a range of $96.75 to $98. Southern Plains heifers in the 550-580 lb. class were in a range of $90.50-100.75 while those from 700-725 brought $92.50 to $96. Cattle from the northern tier saw good prices and strong demand with 550-575 lb. steers bringing a range of $103-111 while heifers in the same class sold between $95 and $100.50. Steers in the 650-690 lb. class sold at $97-109 while heifermates were $96.50 to $102.50. Heavyweight 750 lb. steers from the northern Plains brought $96.
Elsewhere in auction markets last week prices were mostly steady after the bounce in contract prices. In West Plains, MO, last Wednesday, feeder steers and heifers were mostly steady with the number of fly-weight calves reportedly very light, while numbers of heavy calves were reportedly moderate at best. Demand was called moderate to good. In Joplin, MO, a day earlier, a large number of spring calves were offered, finding prices mostly $1-3 lower for steers while heifers were called steady to $2 lower on moderate supply and demand.
At the sale in Dodge City, KS, last week, lightweight cattle were too lightly tested for a market comparison, but reports noted a steady undertone to the sale. Steers between 600 and 800 lbs. sold steady, while those from 800-900 lbs. were called steady to $1 lower. Heifers in the 600-750 lb. class sold steady to $1 lower. To the north in Bassett, NE, steers and heifers trended steady with the exception of 900 lb. heifers which reportedly traded $2 lower than the prior sale two weeks earlier. Demand was called good, with a high number of buyers in attendance, while trade activity was moderate to good.
Meanwhile, farther west in Prescott, AZ, steer and heifer calves were called $3-5 lower while yearling prices also dropped $3-5 from the prior sale. In Madera, CA, last week, the stocker and feeder cattle on offer were reportedly steady on the better kinds while plain and single lots were called $8-12 lower than choice offerings. — WLJ