Demand helps spur feeder prices

Markets
Nov 30, 2009
by WLJ

Demand helps spur feeder prices

Cattle feeders started moving cattle early last week and the bulk of the week’s action appeared likely to be complete ahead of the Thanksgiving holiday. Trade was called steady to 50 cents higher than the previous week at $83-84 live basis in the southern tier while Corn Belt trade was reported at $129-130 dressed. Other feeding regions were expected to trade cattle in the established range after sideways trade in the live cattle contract markets on the Chicago Mercantile Exchange (CME) last Wednesday.

Boxed beef prices showed signs of improvement last week as retailers purchased product for planned post-holiday features. There are signs of some modest improvement in the beef markets, according to retail sources, which has buyers cautiously optimistic that sales between now and the end of the year might be better than expected. If the early December sales period is strong, it could pave the way for gains into the end of the year for both boxed beef prices and fed cattle trade. Last Wednesday, the Choice boxed beef was trading $1.14 higher at $141.83 while Select increased 76 cents to reach $133.45. Sales volume was reportedly light to moderate for the week.

The holiday was also cutting into beef production which was adding to some of the higher boxed beef prices. The total harvest was estimated in the neighborhood of 550,000 head for the week. Vetterkind Cattle Brokerage analyst Troy Vetterkind noted that there was some good demand in the wholesale market for loin primals while chuck and round cuts were also trading with a steady to firm tone last week. He said that improved demand from the fast food sector was also supporting ground beef prices and the cow beef cutout.

The lower U.S. dollar was helping to spur the grain markets higher last week with Wednesday trade in the corn pit moving 15 cents higher at midday after the dollar slipped to new lows against foreign currencies. On the CME, December 2009 corn contracts were trading at $3.90 per bushel. Deferred 2010 month contracts were trading well into the mid-$4 per bushel range during the session. The falling U.S. dollar has been a positive for the grain markets which are also receiving upward pressure from the problems associated with harvest which last Monday was reported at just 68 percent complete by USDA. The upward price movement in the grains is likely to add support to the live cattle trade, although it will come at the expense of lower feeder cattle prices.

In addition to supporting the grain markets, the falling U.S. dollar, which was trading at near-term lows last week after a slew of economic reports showing improvement in the economy, should also help improve beef exports. Beef trade with South Korea so far this year is just one of the export markets which has benefitted from the fall of the dollar. According to USDA data for the month of September, U.S. sales of beef to South Korea are up 12.1 percent from August and an increase of 16.6 percent from September 2008.

Interestingly, the low dollar value has not curtailed U.S. imports of beef from other nations. The strong demand for ground beef products over the past year has withstood heavy domestic cow slaughter and also helped to boost purchases of beef from overseas. According to data compiled by U.S. Customs and Border Patrol, imports of beef from foreign producers are up 11 percent for the year-to-date period through Nov. 2, 2009, totaling 662,688 metric tons. Purchases of beef from Uruguay posted the largest percentage increase, rising to 16,269 metric tons, a jump of 80.3 percent from the same period last year. Purchases of beef from Australia for the January to November period totaled 225,458 metric tons, up 42.1 percent from the same period in 2008. Purchases from Canada fell 2.5 percent, reaching 223,241 metric tons.

Feeder cattle

Feeder cattle trade was light in most markets last week ahead of the holiday with late week sales cancelled for the holiday in most cases. In early week trade, some slight weakness in the grain markets, coupled with prospects for steady fed cattle trade, combined to help prices move higher. Contract trade on the CME was mixed for much of the week, with some small gains in the up front months. Last Wednesday, January contracts closed 7 points higher at $93.30 despite the sharp rise in corn prices. March and April closed steady with the Tuesday close at $94.30 and $95.50 respectively. May contracts were 2 points lower at the close at $96.25 and August was off 17 points to finish at $98.07 in very light trade.

The likelihood of significant quantities of feed-grade corn and continued good grazing conditions in many areas has helped calf prices maintain good levels despite mediocre live cattle prices. Reports from the wheat grazing areas of Oklahoma and Texas indicate very good growing conditions so far this fall which is helping to support calf demand and prices in the immediate and surrounding markets. In Oklahoma City, OK, last Monday, feeder steers sold steady on a light test. Feeder heifers were called steady to $2 higher on a light test. Demand was called good for the few offerings. Steer and heifer calves traded $2-5 higher on extremely good demand with calf orders coming earlier than the norm as a result of the good grazing.

In Joplin, MO, weather conditions in the region had improved last week and muddy pens and roads had dried up enough to allow producers to finally move some cattle, which helped demand and prices at the sale, according to reports. Calves sold $2-5 higher with the best increase on the heifer calves. Yearlings sold steady to $2 higher on moderate to good demand and moderate to heavy supply.

Farther west in Sioux Falls, SD, last week, yearling feeder steers over 850 lbs. traded unevenly steady. Yearling feeder heifers in the 700-750 lb. class were called $2 higher with no comparable sales on other classes of cattle. In Billings, MT, steer calves under 500 lbs. sold steady to firm while steer calves over 500 lbs. sold mostly steady to $3 lower, with a few instances of as much as $5 lower on steers over 650 lbs. Heifer calves under 450 lbs. sold steady to $3 lower while 450-600 lb. heifers sold steady to $3 higher. Heifer calves over 600 lbs. sold steady to $1 lower. Meanwhile, in Torrington, WY, feeder steers and heifers last week were called steady to $2 higher.

On the West Coast in Davenport, WA, feeder cattle were called mostly steady to $3 higher on active trade with good demand and in Vale, OR, the market was called $4-6 higher on a good offering of 500-plus lb. weaned calves. Several out of area buyers were noted at the sale, helping to boost prices for the offering. — WLJ

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