Fed cattle prices slip backward
Fed cattle prices slip backward
The fed cattle trade came early again last week as feedlots took early bids from packing plants offering lower money in the northern Plains. Cash trade was $2-3 lower on 30,000 head sold in Nebraska and Iowa at $83-84 live and $131-132 dressed on Wednesday. There were reports that many of those cattle were bound for plants in the southern Plains while many packers in the North were on the sidelines for the week, citing ample supplies of fed cattle into mid-December, said Vetterkind Cattle Brokerage analyst Troy Vetterkind.
"This will not help southern producers in price negotiations this week and I would look for at least a $1 lower trade if not $2 in Texas/Kansas by Friday. The beef market is going to be soft from now until after Thanksgiving when we could possibly see some reordering by the retail sector for a week or two," Vetterkind said. "Packers are cutting kills to help keep processing margins in line and are drawing heavily on November contract/formula cattle. Many packers have bought cattle the last several weeks and left them in the feed yard until they can work them into slaughter schedules, so all of this is not going to bode well for the cash fed cattle trade this week or next week."
The boxed beef cutout values last week were also hampering the ability to boost fed cattle prices as wholesale movement slowed ahead of the Thanksgiving holiday. Buyers are focused on traditional fare and beef sales tend to soften seasonally until after the holiday passes. There were some reports last week among retailers which indicated that demand could see some signs of post-holiday improvement, but for the next few weeks, beef sales are expected to slow at a time when supplies of fed cattle are, once again, starting to rebuild. Last Thursday, Choice boxed beef was trading 60 cents lower at midday, trading at $139.22, while Select was down just 5 cents at $133.68. Slaughter volume last week was being trimmed by packers with 477,000 head harvested for the week-to-date period. That figure was 13,000 lower than the previous week period, but still 8,000 more than the same period in 2008.
Cow beef cutout prices have shown some resiliency as fed cattle slaughter numbers have slowed slightly due to tight supplies. Although the reduction hasn’t helped boost the Choice cutout, it has translated into strength in the cow beef markets where the cow beef cutout last Thursday stood at $102.21, steady with the prior week despite the high dairy slaughter so far this year. The 90 percent lean traded at $127.03, up slightly from the prior week, while the 50 percent trim was nearly $1 higher at $61.40.
In addition to the tight supplies of fed cattle, export shipments were showing signs of improvement during October, which has also added support to domestic cutout values and, subsequently, to cash trade. Mexico remains the largest buyer of U.S. beef despite trade concerns over country-of-origin labeling. During October, shipments across the southern border reached 11,800 metric tons, according to USDA. That’s an increase of 26.5 percent from the same period in 2008.
Exports to Asia are also showing signs of improvement. The announcement that Taiwan will now accept bone-in beef derived from animals under 30 months of age should help increase trade with the country. During October, shipments to Taiwan should expand farther after a transition period which will pave the way for beef shipments from animals of any age. During October, combined shipments to Taiwan, Vietnam and Hong Kong, some of which are eventually trans-shipped to Chinese markets, rose to 10,200 metric tons, 128 percent higher than the same period in 2008.
Similarly, trade with South Korea also increased last month, although it remains well below last year’s levels. For the month of Ocotober, buyers in South Korea purchased 4,900 metric tons of U.S. beef, 51 percent below October 2008, but a sharp increase from prior months. Further efforts to expand trade, particularly in Asia, given the weak U.S. dollar, could help rapidly return feedlots and packers to a more profitable position in the months ahead. That repair would also go a long way toward improving margins among cow/calf operations.
Feeder cattle markets early last week traded mostly lower as a result of faltering cash fed cattle trade expectations and the highly volatile corn market, which rallied last week after USDA reduced the corn crop estimate due to problems associated with harvest this year. Early week trade in most markets was lower. However, corn prices faded at midweek after reports that farmers in some states had made rapid progress in recent days as a result of the weather. As of last Thursday, December corn futures had slipped back 3 cents from the day prior, however, the contract, at $3.90, was still 13 cents higher than the week earlier level.
There are a number of analysts who feel that corn crop estimates published by USDA remain too high given all the problems farmers are having with harvest. Last week, some were cautioning that the final crop report of the year in January would likely show a big downward revision in total production which could cause prices to rise sharply. Some of that expectation has been factored into the contract market, with deferred futures contracts trading well over the $4 per bushel mark.
Despite the concerns with the corn crop, there is a silver lining for cattle producers and feeders. There are a number of reports from the Corn Belt that indicate there will be ample feed grain available this winter as damaged grain and light-test corn is siphoned off for livestock feed. Likewise, a number of growers are also evaluating whether they will proceed with harvesting for grain or instead chop the corn for a silage mix which would be fed to cattle over the winter. Both scenarios would add some strength to feeder cattle markets this winter as the end of harvest nears. The only limiting factor for such an improvement might be how much credit is available among lenders for the purchase of feeder cattle given the long string of losses in the business the past two years.
In the cash markets last week, southern Plains trade in Oklahoma City, OK, on feeder steers and heifers was called steady, except 600-700 lb. steers which were $2 lower. Demand was called good for feeder cattle, especially heavier weights. Steer calves sold steady to $4 lower. Heifer calves were steady to $2 lower with moderate to good demand for calves. In Pratt, KS, last week, steers and heifers from 350-400 lbs. sold steady to $13 lower, with the bulk of trade called $2-8 lower. Calves in the 400-500 lb. class sold steady to $2 lower. Steers in a range of 500 lbs. to 650 lbs. were called steady to $3 higher while those from 650-800 lbs. sold steady to weak. Heifers in the 500-700 lb. class were steady to $2 lower.
Farther west in Torrington, WY, steers under 550 lbs. sold steady to $3 higher, those in the 550-700 lb. class were called steady to $2 lower and steers over 700 lbs. were steady to $3 lower. Heifers under 700 lbs. sold steady to $2 lower while heifers over 700 lbs. were called steady to $3 lower on good demand for all classes of cattle on offer.
In the Southwest in Belen, NM, last week, lightweight feeder steers and heifers sold $6-8 higher while those cattle over 600 lbs. sold steady, and in Clayton, NM, feeder steers under 500 lbs. sold $3-7 lower while steers over 500 lbs. were called steady. Heifers in the 400-500 lb. class sold steady, with all other classes reportedly $3-5 lower on good trade and demand. — WLJ