Storm might slow weekend sales

Markets
Sep 3, 2010
by WLJ

Fed cattle trade started off slow on Wednesday last week with prices $2-2.50 lower than the previous week in the southern Plains at $97. Farther north in Nebraska, dressed cattle were $2 lower at $153 and in the Corn Belt, live cattle traded steady at $96 and dressed trade was reported steady at $152. The early week trade was light but likely represented the bulk of the week’s needs ahead of the Labor Day holiday and a shortened production week. Until holiday clearance levels are assessed, there is expected to be a lull in the market, according to analysts.

There was some concern last week about the Atlantic hurricane which was forecast to hit the East Coast and impact holiday plans there. If the weather forces evacuations along the coast or does significant damage, it could put a significant damper on beef demand along a major stretch of the East Coast of the U.S. as consumers deal with the weather impact. Packers and retailers won’t have a good handle on the impacts of the hurricane until perhaps the middle of the week, but it could cut into beef sales and post-holiday pricing if the storm hampers the traditional grilling holiday.

Production last week was expected to hit 662,000 head, higher than the previous week’s total as packers filled last minute holiday orders from the retail segment. The increase, coupled with packers’ desire to move product, caused some downward pressure in the boxed beef markets last week. As of midday Thursday, the Choice boxed beef composite cutout stood at $162.95 while Select rose to $157.41 on very light trade.

Industry analysts said last week that the year’s strong increase in prices despite the weak domestic economy was related largely to the decline in overall beef supplies. However, a pickup in demand also played a significant role in this year’s strong pricing picture. Mississippi State University ag economics professor John Michael Riley and American Farm Bureau Federation livestock economist John Anderson said that pull-through from consumers deserved a lot of credit for pushing prices higher than early estimates, with demand from overseas buyers a primary key. They noted that there has been a 2.2 percent decline in total red meat production during the first six months of the year compared with the same period in 2009. During that same time period, red meat supplies in cold storage fell 20 percent from 2009, cutting into overall red meat availability.

It is unlikely, however, that cattle and hog markets would be where they are now without some pull from the demand side, according to Riley and Anderson. They say U.S. red meat exports have been encouraging and forecasts are for this trend to continue.

According to USDA’s World Agricultural Supply and Demand Estimate, 2010 exports of beef are expected to increase 13 percent from last year’s levels. Pork exports are projected to rise by 9 percent, contributing significantly to the price increases for both.

"While domestic demand will clearly have the greatest influence on the direction of the market moving forward, foreign demand has provided a helpful boost to the market this summer and has helped to put livestock markets into a much better than expected position headed into fall," the economists said.

Cow beef markets have also benefitted from the upswing in demand during the first half of the year. Despite high cow slaughter and ongoing dairy herd reductions, cow beef cutout prices have remained strong. Last week, the cow beef cutout stood at $134.88, more than $30 ahead of the same date last year. The demand from all sectors for cow beef and grinding products has maintained cow prices at the $50-60 and higher level through the summer when supplies are seasonally light. The 90 percent lean was trading at $169.73 last Thursday, more than $31 more than the same date last year, and the 50 percent trim product reached $68.20, up nearly $12 more than last year.

Even as culling begins to ramp up, prices are expected to remain above last year’s levels and with some producers expected to expand their herds this year, prices through the winter could remain strong, making cow feeding an attractive option for some producers with surplus feed supplies this winter.

Feeder cattle

Feeder cattle markets were mostly softer last week as corn prices moved higher. Last Thursday, the crop hit $4.47 per bushel, pressuring feeder cattle. There were some concerns that the warm late-summer weather was speeding maturation of the crop, which could hamper eventual yields.

The corn crop has been estimated to be close to a record this year and last week, commodity trading firm FC Stone set its corn crop estimate at 13.195 billion bushels. In early August, USDA had estimated the crop at 13.365 billion bushels, up nearly 2 percent from last year. The next corn crop estimate is due out Sept. 10, which should provide a more accurate indicator of where this year’s production will land, hopefully removing some volatility from feeder cattle markets. Corn prices have been pushing higher since late June on concerns that the crop would not meet early expectations.

Feeder cattle prices were reported $1-3 lower in most markets last week with weather concerns adding discounts to feeder cattle which weren’t weaned or vaccinated and therefore subject to greater likelihood of stress-related illnesses. In Oklahoma City, OK, last week, feeder steers sold steady to $3 lower with steers over 800 lbs. showing the least decline. Feeder heifers traded $1-3 lower while steer calves were called $2-4 lower and heifer calves were $1-3 lower on good to moderate demand. Meanwhile, in Joplin, MO, steers under 650 lbs. and heifers under 600 lbs. were called $2-5 lower and sales of yearlings were steady on moderate demand for a big run of cattle.

Farther west in Hub City, SD, feeder steers from 750-950 lbs. sold steady and feeder heifers from 700-950 lbs. sold $1-3 higher on good demand. Other weight classes were too lightly tested during the sale for an accurate market comparison.

In the Southwest in La Junta, CO, lightweight steer calves sold steady from $125-136 with a few at $140. Heavier weight steers were steady to $2 higher from $112-126. Light heifer calves were steady to $2 lower from $110-126 and heavier classes were $2 lower from $105-111. At the market in Clovis, NM, feeder steers and heifers were called unevenly steady with some instances of prices trending $3-5 lower on 500-600 lb. steers and 400-600 lb. heifers.

On the West Coast in Cottonwood, CA, there was reportedly good demand for the light offering of cattle under 600 lbs., however, no trend was available because of the small numbers. Cattle over 600 lbs. traded $1-4 higher. Farther north in Vale, OR, calf numbers were light, so no test was available last week. Yearling cattle were called steady, with 700-800 lb. offerings trading in a range of $99-112 and heifers in the same class were $5-7 back. Steers in the 800-900 lb. class sold from $96-103, with heifers $4-7 back. — WLJ

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