Market stalls, slips back
Last week’s trade appeared set to be a Friday affair, with buyers and sellers alike settling in to wait for the release of the cattle on feed report before conducting any business. At midday last Thursday, only a little light volume had changed hands to a regional packer in Nebraska at $160-161 dressed basis. The week’s action was expected to take place at $99 live with dressed sales trending between $158 and $160, steady to $2 lower than the previous week’s trade.
The futures markets which moved mostly sideways last week and choppy trade in the boxed beef complex were responsible for the downward price action in the fed cattle markets. Prices remain good, but buyers have started to back away from the table at current wholesale price levels. Last Thursday, Choice was slightly lower than the prior day at $167.53 while Select was slightly higher at $165.59, but volume was anemic at those levels, indicating that buyers have met their immediate needs. Until Memorial Day buying hits its stride, the domestic market could be stagnant, which will pressure fed cattle prices.
Slaughter volumes last week continued to trend above recent levels. Through Thursday, harvest was estimated at 509,000 head, up 9,000 from the same period the prior week and 2,000 more than last year’s tally. The increase is indicative of the solid job cattle feeders have done staying current in their marketings this year. The demand for cattle by packers has been boosted by the sharp decline in slaughter weights, which has meant packers need more total cattle to meet their needs. According to the Livestock Marketing Information Center (LMIC), on a weekly basis, Federally Inspected (FI) cattle slaughter has averaged nearly 3 percent above a year ago and about 5 percent above the 2004-2008 average.
LMIC analysts also noted that there are other factors driving harvest numbers higher, including an increase in the number of beef cows in the slaughter mix and a rising number of Canadian slaughter cattle being imported from the north.
"According to the most recent actual weekly data available reported by USDA (through March 27), year-to-date weekly FI steer slaughter has averaged about 2 percent above 2009’s and around 1 percent higher than the 2004-2008 average," LMIC noted last week. "At the same time, FI heifer slaughter has averaged 5 percent larger than 2009 and nearly 3 percent over the prior five-year average. So far this year, the number of steers in the slaughter mix accounted for just fewer than 48 percent, which is slightly less than last year, while the percentage of heifers averaged nearly 31 percent versus 30 percent in 2009."
A similar trend has shown up in the imports of Canadian slaughter cattle, according to LMIC analysts, who noted that at the start of 2010, imports were below prior year levels.
"However, since February, weekly imports of slaughter heifer and steers have been above a year ago, mostly the result of surging U.S. fed cattle prices. As of late March, slaughter steer and heifer imports totaled about 184,000 head or around 15,000 head per week, according to the preliminary weekly trade data," they reported. "Compared to last year, year-to-date U.S. slaughter steer and heifer imports from Canada were up 15 percent; still, that was about 18 percent smaller than the 2007-2008 average."
Cow slaughter numbers are trending even with last year but remain 19 percent above the five-year average. However, there has been a shift in the make-up of the slaughter mix. LMIC reported that the cull cow markets now consist of a greater number of beef cows heading to slaughter, versus 2009, when the bulk of marketings were dairy cows being culled.
"FI beef cow slaughter was nearly 8 percent higher than last year from January through late March, while dairy cow slaughter was down 6 percent," LMIC analysts said. "When compared to the 2004-2008 average, both FI beef cow and dairy cow slaughter numbers so far in 2010 are larger, up 22 and 16 percent, respectively."
The increase is indicative of the longer-term trend toward herd downsizing in the U.S. Yearly declines in beef cow numbers have been averaging around 1 percent over the past several years and with the slaughter of beef cows picking up this year, 2010 is likely to see similar declines if the trend holds, meaning an already tight supply of feeder cattle could shrink farther next year. Heifer retention numbers and heifer slaughter numbers will be worth watching as the industry works through currently good prices. The trend through 2010 will set the tone for both prices and availability of cattle in 2011.
Heavy precipitation last week cut feeder cattle receipts in some central U.S. markets and slowed the deployment of planting equipment in much of the Midwest. The result helped lend a little strength to corn prices while sending feeder cattle prices $1-2 lower in most markets. However, prices in nearly all areas remain well above year-ago levels with numerous reports of prices above the $130 level for five-weight steers. Availability is becoming the issue in several areas, with reports of low numbers of available stocker and feeder cattle becoming the norm as many sellers took early advantage of rising prices. Producers looking to buy cattle for available grass are finding that they need to sort through the offerings at auction markets to meet their needs in many cases, according to USDA market reporter Corbitt Wall. He said attention has now turned away from the feeder and stocker cattle markets toward spring planting in most areas.
"Many summer grass grazers will now be satisfied with what stocker cattle they have accumulated to this point, with previous purchases now on the gain and attractive supplies of suitable grass cattle dwindling while temperatures rise," he said. "Calf offerings have suddenly become dominated by fleshier new-crop bawlers that are much more challenging to straighten-out and don’t quite share the green forage appreciation that the thinner old-croppers exude. The spring run is now winding down with only the rush of graze-out wheat cattle marketing left to stir excitement between now and the annual summer slow-down."
Wall noted that the recent run in prices is settling down and most producers would be happy to see prices settle near current levels after the spring volatility.
In Oklahoma City, OK, last week, feeder steers sold steady to $2 lower while feeder heifers were $1-2 lower. Steer and heifer calves were reportedly not well tested but a lower undertone was noted. Demand was called moderate for most classes of cattle on offer. In Joplin, MO, last week steer calves under 500 lbs. sold $5-10 lower, steers in the 500-700 lb. range, were called $3-7 lower, and those over 700 lbs. were steady to $2 higher on light numbers. Heifer calves sold $2-5 lower while yearling heifers were called steady to $2 lower. Demand and supply at the market was called moderate, with large numbers of new crop calves on hand.
To the west in La Junta, CO, lightweight steer calves were called steady in a range of $125-142 while heavier weights were in a range of $125-147. Heifer calves brought a range of $115-123, steady with the previous week, while heavyweight heifers sold $2 higher at $112.50 to $128.
Farther north in Miles City, MT, last week, feeder and stocker steers were lightly tested, so no trend was available, but a lower undertone was noted at the sale. Stocker heifers under 600 lbs. sold $2-5 lower; feeder heifer offerings over 600 lbs. were called steady in limited test.
On the West Coast in Madras, OR, steers in the 400-500 lb. class brought a range of $110-130 last week while 500-600 lb. steers commanded $120-127 and heifermates sold between $106 and $118. Heavyweight steers from 700-800 lbs. sold from $99 to $109 while heifers in the same class brought $98 to $101. Farther south in Cottonwood, CA, a light run of cattle sold slightly lower than the prior week’s action with steers in the 550-600 lb. class selling between $121 and $130 while heifermates were $7-11 back. Heavier 700-750 lb. steers sold between $103 and $110.50 while heifers in the 750-800 lb. range brought $96-100.50. — WLJ