Fed prices jump
Fed prices jump
Active fed cattle trade started off early last week with live cattle trade in the southern Plains at prices $1-2 higher than the previous week on Wednesday. Texas cattle feeders managed to push live prices up to $88 while feedlots in Kansas sold live cattle at $87 and Nebraska live trade was reported at $86 late in the day. Corn Belt cattle feeders started early with light Tuesday trade at $131-133 dressed, steady with the previous week’s action. For the week, analysts predicted that the bulk of the Corn Belt trade would come in a range of $134-135 as most of the heavy cattle in the region had been cleaned up in past weeks.
The cash trade last week was helped higher by a strong rally in boxed beef prices. Beef supplies in recent weeks have grown tight and there have been reports of packers struggling to fill orders for quick-ship product. At the same time, retailers are booking their early holiday needs. Both of those factors helped last week to push boxed beef prices more than $5 higher than the previous week. Choice boxed beef at midday last Wednesday was trading at $142.04 while the Select product traded $4 higher than the prior week at $137.26. Analyst Troy Vetterkind of Vetterkind Cattle Brokerage said the market could begin to slow as many buyers have fulfilled their near-term needs. However, he pointed out that other beef cuts could pick up some of the slack in the market.
In particular, Vetterkind noted that demand for ground beef from retail and the foodservice sector has been strong in recent weeks. There was concern that the third round of dairy herd retirements would cut into that market, but last week, Cooperatives Working Together reported that only 26,000 head had been offered for the buyout, fewer cows than initially expected. Those cows should be cleaned up by the end of the year, according to Vetterkind, who predicted that price rallies in the cow beef markets could be difficult to sustain until then.
"However, demand is such that I wouldn’t expect to see the market crash," he said. Last week, the 90 percent lean was trading at $126.19 while the 50 percent trim market was steady at $61.40. The large number of dairy cows heading for slaughter this fall as a part of the dairy buyouts have kept a lid on prices which are more than $25 below last fall’s levels on the 90 percent lean. The 50 percent trim was nearly $20 behind prior-year levels last week while the cow beef cutout has held up better, trading at $102.01, down from $119.44 the same date last year. Some of the resiliency in the cow beef cutout can be attributed to the consumer demand for lower-priced beef cuts and their willingness to trade down to obtain lower-priced cuts rather than choosing competing proteins such as pork or poultry.
As a result of that strength, beef cow and bull prices have not fallen as sharply as they have during past dairy buyouts. Prices remain within a few dollars of last year’s level in most markets. Last week, slaughter bull prices in most markets stood at the mid-$50 level, nearly steady with the same date last year. Cow prices have fallen $2-4 on the better kinds suitable for breaking while the lower yielding cows have seen larger discounts, trading in the mid-$30s to low-$40 range in most markets across the nation.
Export markets remain a point of weakness for the beef industry after several years of strength. Volume has dropped off significantly this year and prices have been under pressure as a result. The global economic downturn has played a role in the export picture this year, particularly in shipments to Russia, which are down 55.1 percent from last year. Similarly, the two largest buyers of U.S. beef in recent years, Canada and Mexico, have decreased their purchases of U.S. beef this year. Shipments to Mexico through August were down 27.8 percent from August 2008 while sales to Canada are off 12 percent from last year’s pace. Some analysts have said some of the decline could be related to the ongoing dispute over the U.S. country of origin labeling laws. Those regulations have created a good deal of acrimony in both countries and could be contributing to the decline. In total, the drop in beef shipments to those two countries amounts to more than 91,000 metric tons through the first nine months of the year. Some of the shortfall has been made up for by increased shipments to Asian trading partners such as Japan, where imports have increased 22 percent from last year, and South Korea, which has seen a 123.5 percent increase from last year’s low levels.
There is some hope that shipments to foreign trading partners, particularly with the weak state of the U.S. dollar, will provide a boost into the end of the year. However, it is unlikely that trade will reach the stellar levels of 2008 as most nations are still struggling to repair their economies. For the year through August, U.S. beef exports to all countries are down more than 10 percent from last year’s levels, a drop of 65,465 metric tons. While it may not reach last year’s levels, foreign trade currently represents the best opportunity for U.S. beef producers to quickly regain lost value in the fed cattle and boxed beef markets.
Feeder cattle prices have managed to stage a good rally along with fed cattle prices over the past two weeks despite concerns that have turned grain prices higher. Corn prices have been subjected to a variety of weather-related price swings recently, a trend that could continue if farmers have more problems getting the crop out of the field. Last week, corn prices were trading at $3.69 per bushel on the Chicago Mercantile Exchange. Although still higher than most cattle feeders were hoping, that’s down from the prior week’s level over the $4 mark. Oil prices had backed off last week and weakness in the economic recovery, along with attempts to improve the U.S. dollar value, could translate into more weakness in the corn market which would help calf prices further their recent rally. A good number of the feeder calves in the country have been cleaned up by buyers, according to reports, and there are also fewer stockers available, as expected. The decline in the cow herd has resulted in fewer available calves this fall which has helped stabilize prices across the board.
Very good moisture in the southern tier has resulted in tough feeding conditions which have hampered cattle feeders and resulted in some hesitant buyers for feeder cattle last week. However, that same moisture has translated into very good early season wheat pasture growing conditions. Demand among stocker operators for light-weight calves suitable for grass was evident at many stockyards in the South last week and prices were mostly $1-3 higher than previous sales as a result.
In West Plains, MO, last week, steers in the 400-500 lb. class were steady while those from 500-750 lbs. were called steady to $2 higher. Steers over 750 lbs. sold $2 to mostly $3 higher than the previous week. Heifers were reportedly mostly steady although several high quality 400-600 lb. offerings sold $1-3 higher. Demand at the sale was called moderate to good while supply was called moderate. Meanwhile, in Amarillo, TX, feeder steers sold steady to $2 higher last week. Feeder heifers in the 300-600 lb. class were called $4-6 higher while heifers over 600 lbs. sold steady to $2 higher on active trade and good demand.
Farther west last week in Prescott, AZ, choice steer and heifer calves were called $1-3 lower than the previous week while yearling steers and heifers were reportedly steady. In Galt, CA, feeder steers and heifers under 650 lbs. were sharply higher last week, trading $3-7 above the prior week’s market. Those cattle over 650 lbs. were called steady to $2 higher. — WLJ