Winter taxes south Plains

Feb 5, 2010
by WLJ

Feeder cattle demand boosts prices in the West and northern Plains.

Winter weather was taking a toll on southern Plains feedlots last week as the cold, wet conditions continued to hamper performance in Oklahoma and the Texas Panhandle. The ice storm two weeks ago was followed by another minor storm system which swept through the area at midweek last week which has created problems with mud in the region. That mud has cut into feedlot performance deeply enough that analysts now expect it to ripple into the late spring marketings of fed cattle in the form of lower carcass weights and increased cost of gains for feedlots. On the other hand, it could also help decrease production, helping to push live cattle prices higher.

The weather is expected to continue to depress cattle performance in the South for at least the next couple of weeks as a series of storm systems appear set to roll through the area, according to the long-range forecast. That will continue to be a market mover into the spring depending on the severity of the weather. However, it will also make southern Plains feeder cattle placements less attractive, limiting the price action at the feeder cattle sales in the area.

Cash fed cattle trade last week was slow getting started with analysts predicting steady trade in the area of $85-86 live basis in the southern Plains with dressed cattle expected at $135-136 in the North and in the Corn Belt region. Outside markets were providing a little added pressure on the trade last Thursday with equity markets trading sharply lower. That, in turn, was adding pressure to the commodity trade, forcing cattle futures downward. If the sell-off were to continue through the end of the week, analysts said it could soften the cattle trade for the week.

Another factor weighing on the cattle trade last week was a softening cutout which was affecting packer margins. The Choice product traded 45 cents lower at midday last Thursday at $139.33 while Select was off 59 cents at $136.56. Movement was called light to moderate with 122 fabricated loads changing hands and just 39 loads of trim and grind product moved. Export volumes last week posted some significant improvements despite a strengthening dollar. For the week, export sales reported to USDA reached 16,100 metric tons, a 17 percent increase from the previous week. Increased sales were reported to Mexico, the largest buyer, with 4,800 metric tons, as well as South Korea, Japan, Taiwan and Canada.

The export markets are likely to be a key factor for the U.S. beef industry if prices are to stage a significant rebound in 2010. Already, a recovery in drop values has helped boost cattle prices over the past several months. The foreign demand for beef byproducts has added several dollars to prices being paid to feedlots. Now, the focus has started to shift to carcass values as foreign economies begin to recover from the global recession. As a result, USDA expects the trend to translate into greater overseas demand for U.S. agricultural products, particularly protein supplies.

For the 2010 marketing year, USDA predicts that pork exports will grow 8.4 percent to levels nearing the record of 4.667 billion pounds set in 2008, nearly 20 percent of all U.S. production. Beef exports, by tonnage, are also projected to increase through the year by an estimated 9.6 percent. If realized, that increase would push 2010 beef exports to a level not seen since 2003, which will pave the way for higher prices.

One limiting factor for the protein market is USDA’s projection for the poultry market, which is expected to decline by 11 percent as a result of ongoing export problems with large buyers of U.S. chicken products, most notably Russia, which has yet to agree to resuming trade. If the problems are not resolved, the excess product would be dumped on the U.S. market, depressing all proteins in the process and limiting any potential gains that otherwise might have occurred.

Feeder cattle

Feeder cattle markets were mixed last week, with the trend largely based on the regional weather. Several southern Plains markets remained closed after winter weather hampered the shipping of cattle to markets. The Oklahoma City auction was closed for a second straight week because of the weather and other sales in the region reported very low numbers as a result of the weather. However, the closures were probably welcome as feedlot buyers have been sidelined until they can get feedlot mud cleaned up. Until placement conditions improve, buyers for south Plains feed yards are likely to be sitting on the sidelines.

However, the story was very different farther north where feedlots are working to buy cattle in an effort to take advantage of cheaper feed grains. Northern Plains markets reported mostly good demand for offerings last week, with prices called $1-2 higher at many markets. Similar action was noted on the West Coast, where good winter precipitation has helped the grass picture, particularly in California. The result has been strong markets for feeder and stocker cattle, particularly the lighter kinds suitable for grazing.

At the sale in Madras, OR, last week, steer calf prices were strong, with 400-500 lb. steers selling between $115 and $120; heifermates were called $7-8 back. Steers in the 500-600 lb. class sold in a range of $106-115 on a light test. In Vale, OR, the market was called steady with good demand on all classes of cattle, including the limited number of yearlings on offer with 400-500 lb. steers selling from $107-121 and with heifers from $98-114. Yearling steers in the 600-700 lb. class brought $97-108, with heifers called $10-13 back.

In Blackfoot, ID, sales were also called steady with the previous week at good levels. Steers in the 400-500 lb. range sold from $101-123 while heifers in the same weight class sold $4-6 behind. Five- to six-weight steers sold between $98 and $121 while heifermates brought $8-11 less. Meanwhile, in Burley, ID, four- to five-weight steers sold in a range of $112-128 while heifers sold $10-14 back, and 500-600 lb. steers sold from $105-118.50 and heifers in the same class brought $95-105.50.

Farther south in Cottonwood, CA, all classes of feeder cattle were reportedly selling $2-8 higher with the best demand coming on grass-ready heifers. Feeder steers in the 500-550 lb. class were sold from $110 to $124 while heavier 700-750 lb. offerings brought $93-97. Heifers in the 450-500 lb. class sold from $105 to $126.75 while 550-600 lb. heifers brought a range of $95 to $104.50. In Galt, CA, last week, all cattle on offer sold steady with the previous week’s sale. Feeder steers in the 400-500 lb. class sold from $115 to $134 while heifers of similar type and kind brought $97-116. Steers in the 500-600 lb. range sold from $105-120 and heifers in the same class brought $90-112. Heavier 600-700 lb. steers sold in a range of $97-112.

Similar strength was found in markets farther east as well, last week, with the market in Presho, SD, reporting that feeder steers sold $3-5 higher. Feeder heifers sold steady to $1 higher with several large loads on offer at the sale. Likewise, in Lamoni, IA, last week, feeder steers were mostly $1-3 higher with feeder heifers mostly $1-2.50 higher than the previous week on active trade and good demand. — WLJ