Feds trade higher
Fed cattle trade got a boost last week from better than expected Labor Day clearance levels and a return to a full production schedule for packing plants. The cash fed cattle trade in the southern Plains last week was complete by Wednesday, with packers paying $1-2 more than the previous week with trade reported at $97-98 live basis in the South. In Nebraska and the Corn Belt, the week’s dressed trade occurred at $152-154, up $1-2 from the prior week’s action.
Boxed beef sales last week were reportedly good with some retailers stocking up on supplies after holiday sales. However, packers also cut prices to keep beef supplies moving into retail channels. At midday last Thursday, Choice boxed beef was trading 61 cents lower at $160.86 while Select product was off 93 cents at $154.51. Movement was reportedly moderate with 107 fabricated loads and 59 trim and grind loads trading hands. Harvest volume for the short production week was expected to hit 575,000 head as packers capitalized on the good demand and positive margins.
The beef export markets, which have been key to maintaining beef prices, got a significant boost last week when Russia announced it had banned meat exports from several South American packers. The Russian market, which has been growing in size and importance for U.S. packers, will help boost beef values if those plants remain banned from shipping to Russia for an extended period of time. The Russian market has grown substantially since exports resumed there. Export sales of beef and beef variety meats have increased 728 percent for the year-to-date period. The market, which was the fifth-largest for U.S. producers prior to the discovery of bovine spongiform encephalopathy, has also shifted, with buyers looking to the U.S. for muscle cuts, whereas in the past, it had primarily been a market for variety meats such as liver. In June, shipments of beef muscle cuts to Russia reached 3,708 metric tons, according to USDA, an increase of more than 1,100 metric tons with a total value of $13.65 million. For the year-to-date period through June, sales of beef muscle cuts have increased 2,965 percent from the same period in 2009 to reach $64.7 million. With the halt of exports from South America, the Russian market could add significant support to beef prices in the U.S. in the weeks ahead.
Other nations are also increasing, although none as sharply as the Russian market. Both Japan and South Korea have ramped up their purchases of U.S. beef in 2010 with South Korea posting a 131 percent increase in year-to-date sales figures, reaching $215 million in the first six months of the year, up from $93.3 million for the same period last year. For the month of June, U.S. exporters shipped 12,002 metric tons of beef whole muscle cuts, with a value of $59.8 million, to South Korea, up from 3,032 metric tons, worth $13.3 million during June 2009. For the year-to-date period, South Korea is the fourth-largest buyer of U.S. beef products.
Japan is the third-largest buyer behind Canada and Mexico. Despite restrictions on age, exports to Japan are also on the rise in 2010, posting a 24 percent increase from last year, mainly due to the difficulty in sourcing cattle to meet the market’s stringent requirements. Year-to-date shipments of beef whole muscle cuts through June totaled 44,230 metric tons, up from 35,804 for the first six months of 2009. The total value of beef shipped to Japan rose from $185.7 million during the first six months of 2009 to $229.5 million for the same period in 2010. During June, sales increased sharply, rising in value from $50.2 million last year to $64.3 million during June 2010.
Canada is the largest buyer of U.S. beef by value with sales totaling $311.1 million for the first half of 2010, an increase of 4 percent from the same period last year. Mexico trails slightly with purchases of $301.9 million, a decline of 9 percent from the same period last year. Sales to Mexico during June tallied a sharp decline, in part to the ongoing trucking dispute and border violence that has created trade difficulties. U.S. exporters shipped 12,987 metric tons to Mexican buyers during June, down from 19,464 shipped during June 2009. The value of those exports dropped to $54.1 million, down from $67.5 million the previous June, illustrating the importance of the Mexican market for U.S. producers and the need to resolve the issues which are adding to trade difficulties between the two nations.
Many early week feeder cattle sales were cancelled due to the holiday last week. However, later week auctions reported prices were under pressure as corn prices rose last week. Commodity funds also began selling feeder cattle contracts, adding further pressure to contracts and to the cash market in many areas.
There is growing concern in the markets that USDA’s expectations for a 13 billion bushel corn crop are unlikely to be realized, which has increased volatility in the grain markets over the past few weeks. Last Thursday, new crop December corn contracts were 8 cents higher than the previous session, trading at $4.71 per bushel. Analysts predicted that the USDA’s World Agricultural Supply and Demand report, due out last Friday, would lower expectations for this year’s corn crop, as early reports from areas where combines are rolling have been disappointing, with yields running 5-20 percent behind last year due to the crop’s early maturation.
Many southern and central Plains markets are already seeing cattle shipped to town and run sizes are on the increase. Despite the increase in numbers, buyers have been more than willing to absorb the supply, bidding weaned and preconditioned cattle well above the levels seen last year in most markets.
In El Reno, OK, last week, feeder steers sold steady to $2 lower while heifers were called steady to $1 lower than the prior week. Steer calves were steady to $2 higher while heifers were $2-4 lower on moderate trade and demand. The southern Plains was receiving some moisture last week as the remnants of a tropical storm moved north out of Mexico into Texas and Oklahoma, causing flooding in some areas, particularly near the Mexican border. The rain helped pasture conditions, but also flooded out some winter wheat fields and delayed field work. However, the rain was much needed and started some producers thinking about the possibility of winter wheat grazing later this year, which likely added some optimism in the regional markets.
Farther west in La Junta, CO, on a small run, lightweight steer calves were called steady, selling from $122-137.50 while heavier weights were steady from $112-126. Light heifer calves sold slightly lower than the previous week from $113-118 while heavier heifers sold steady from $108 to $110.50.
In the Southwest at Prescott, AZ, choice steer and heifer calves sold $2-4 lower than the prior week’s sale while the plain types were called $4-6 lower. Yearling steers and heifers sold steady on the better kinds.
On the West Coast, in Galt, CA, feeder and stocker cattle sold steady across all weight classes last week. Steers in the 500-600 lb. weight range sold between $115-128 while heifers in the same class brought $90-105. Heavier steers in the 700-800 lb. category sold from $97 to $110 while heifermates brought $82-95. — WLJ