Market falls $2-3
Market falls $2-3
Fed cattle markets traded lower last week despite conventional wisdom that the powerful winter storm that swept most of the country should have helped prices. Wednesday trade in the southern Plains was light to moderate in volume at $79-80, prices which were $2-3 lower than the previous week’s trade. Live sales were reported at $79-80 in Kansas, with dressed sales 50 cents lower at $127. In Nebraska, trade last Wednesday was moderate on light to moderate demand at prices $2-3 lower than the prior week at $78 to $79. Dressed sales trended $1-3 lower from $127 to $129. Analysts expected the clean up trade to come in line with the early trade as little improvement was shown in the market fundamentals late in the week with both boxed beef and futures markets trading lower last Thursday.
Slaughter volumes were sharply lower last week as a winter storm impeded movement of cattle and beef to and from packers, leading to a production decline. Harvest for the week through last Thursday was estimated at 459,000 head, down 35,000 from the previous week and 22,000 fewer than the same period last year. That decline could help stabilize prices in the very near-term, however, analysts said last week that the demand side of the equation shows little sign of improvement into the end of the year, which may make for some further price declines in the fed cattle market over the next few weeks. Last Thursday during morning trade, the Choice boxed beef was down 84 cents at $134.53 while Select was up 5 cents at $128.65.
Analyst Troy Vetterkind last week noted that there is some expected improvement which should help shore up some support for the beef trade in the future. USDA’s monthly supply and demand report showed an expected decrease in production of beef, pork and poultry as a result of lower hog and cattle slaughter and slow expansion in the poultry industry. The agency also increased the expectations for foreign sales of U.S. beef as the economies of key trading partners begin to improve.
"This will be a positive for next year’s markets but won’t mean anything in the near-term," Vetterkind noted. Vetterkind said the current futures market trade is a "wreck" and contracts appear set to move lower in the near-term. He said he expects that current trends could carry the December live cattle contract into the mid $70s if key contract support at $79.17 can’t hold.
"February looks like it has every intention to go down and test $80 before finding any type of support," he said. "Futures once again are in a very oversold condition and due for some sort of corrective bounce higher. However, until we find some sort of stability in the cash beef trade, the market is going to keep leaking lower."
The bright spot in the market last week was in the cow and bull markets which have firmed up in the absence of significant supplies of cattle. Now that dairy culls have worked their way through the market place, demand remains strong for grinding product and cow beef cuts which has led to a strengthening of that market. Cull cow and bull trade has been resilient for most of the year and could show some significant seasonal improvement into next year as a result of light supplies. Producers who have chosen to winter their cows to market as "white fats" in the first quarter could see some good rewards for the practice this year. Last week, the cow beef cutout stood at $106.10, up $4 from a month earlier when dairy slaughter numbers were higher. The 90 percent lean last week traded at $133.83, up $7 from the previous month, while the 50 percent trim market was more than $13 higher at $73.75.
Feeder cattle trade was a two-way affair last week with early week cash markets showing mostly higher trade while the disappointing fed cattle trade at midweek pulled later sales mostly lower. The futures markets also moved lower late in the week with Thursday trade narrowly lower. The January contract closed the day down 25 points at $90.80, near the long-term support level Vetterkind said was crucial.
"Feeder cattle look poised to test important long-term support at $90, where it will be important to hold this to keep a move into the mid-upper $80s at bay," he reported. The March contract closed 30 points lower at $91.62 while April ended the Thursday session down 37 points at $93.62.
Vetterkind said that the feeder cattle markets will continue to track the fed cattle markets for the near-term. That could continue to make for lower trade into the end of the year as there are few reasons for the two to separate. Although there are reports of a lot of feed quality corn available, little of that volume is making its way to the market at the present time and, in fact, growers are unlikely to begin serious sales of light-test weight or damaged corn until after harvest is complete in all areas. There is still a good quantity of corn left in fields across the northern states, some of which may not be harvested at this point. Harvest is likely to continue into next year as winter weather begins to set into those states in earnest, complicating the effort. The result of these delays has kept corn prices elevated and frustrated feed yards, some of which have remained on the sidelines of the feeder cattle market this fall. Some have been waiting to procure their corn needs in the hope that prices would fall with the close of the harvest season as farmers tallied up the second largest crop on record.
Last week in the cash markets at Oklahoma City, OK, winter weather conditions reduced sale volume slightly as movement of cattle was hampered. Feeder steers on offer sold $1-2 lower. Feeder heifers were called steady to $1 lower. Steer and heifer calves sold steady to $3 lower on moderate demand for all classes. In Joplin, MO, steer calves and yearling steers sold steady to $2 lower, with some cattle over 725 lbs. selling $3 lower. Heifer calves were called $2-4 lower, yearling heifers were steady to $2 lower on moderate supply and demand.
Farther west in Riverton, WY, last week, steer calves weighing 450-650 lbs. were selling steady with instances of $1-3 higher, steers under 450 lbs. were reportedly lower, along with those lots over 650 lbs. Heifer calves weighing 350-650 lbs. sold with higher overtones and some instances of trade as much as $2 and a few sales as much as $4-5 higher on moderate to good demand.
To the north, in Miles City, MT, winter weather conditions hampered some deliveries, however, the reduced offering met with prices called $1-3 higher for steer calves with the best action on 500 lb. lots. Heifer calves sold unevenly steady.
On the West Coast in Madera, CA, stocker and feeder cattle were called steady with the previous week in a light test. Meanwhile, at Cottonwood, CA, yearling feeder cattle sold mostly steady last week while the better end of the grass cattle offerings were called $2 higher than the prior week’s offering. — WLJ