Cattle markets reverse course to trade higher

Markets
Mar 25, 2011
by WLJ

Fed cattle traded last Wednesday with good volumes reportedly changing hands in most feeding regions. In the Corn Belt, where supplies of market-ready fed cattle are short, prices started mostly steady with the previous week at $184-185 dressed with late trade moving as high as $188-190 before the action was complete. Live trade in Nebraska and the Corn Belt was reported at $114-116. In the southern Plains, where cattle supplies are larger with more coming available quickly in the weeks ahead, feedlots were willing to settle for mostly steady money with most trade in a range of $113-114 live, with most Kansas trade coming at the upper end of that range.

The steady to higher money last week helped turn sentiment around somewhat and futures markets ended up moving higher after cash trade developed. At midday last Thursday, prices on the up-front months were trading more than $1 higher, with April seeing the biggest boost, trading up 135 points at $115.45 while June was 112 points higher at $114.47. Deferred months were also in the green with October gaining 67 cents to hit $119.85 and December live cattle contracts were up 45 points to reach $120.45 at midday last Thursday.

The improvement in futures markets which have been driven higher by the extreme optimism in cattle and beef markets offers a good opportunity for cattle feeders to hedge late-year marketings and insure some profits, which should help maintain solid feeder cattle pricing into the fall.

Much of the positive momentum in the cash fed cattle markets is the result of very good beef sales, particularly into overseas markets. However, over the past couple of months, domestic sales have also been turning around even as beef prices have started rising. Likewise, the restaurant industry has also seen signs of improvement as industry surveys have shown some increases indicating a turn-around could be near. That has helped move more beef into both domestic and foreign retail channels. Last week showed that even Japan remains a large buyer despite the damages created by the earthquake and tsunami. There were some immediate concerns about the impact that the disaster would have on beef sales in this very important market, however, analysts have pointed out that once the country begins to stabilize and rebuild, it will need to replenish food items, which could cause an increase in export opportunities for agricultural products, including beef. Last week, there were signs that some of those sales were being booked despite continuing problems in the supply chain. According to USDA, last week, Japan was the largest buyer of U.S. beef, with sales of 3,900 metric tons with shipments of some 1,900 metric tons. Trade to Japan could be choppy for some time to come as the country rebuilds, however, it appears that there is some positive news coming out of that market. Other foreign buyers were also active in the market. Mexico was the second largest customer, buying 3,400 metric tons last week while South Korea purchased 2,700 metric tons and Russian buyers booked 1,800 metric tons of beef.

The activity in the beef markets helped support composite boxed beef cutout values at good levels. At midday last Thursday, Choice boxed beef was trading 58 cents lower at $187.56 while Select was up 26 cents at $185.53. Movement of product was moderate with 90 fabricated loads of product trading. Packers have done a good job of managing production levels to prevent a backlog of product in cold storage while still maintaining an orderly processing of market-ready fed cattle and the entire supply chain remains very current, which will benefit the industry greatly, particularly as the traditional seasonal demand increase that comes with the start of grilling season gets underway soon.

Feeder cattle

Feeder cattle prices in both the cash and futures markets last week received some good news in the form of higher fed cattle prices across the board. There continues to be very strong demand for nearly all classes of feeder cattle and buyers have been bidding prices higher to secure their supply needs. Nearly all auction markets reported higher prices last week as run sizes begin to fall seasonally. Most markets have seen the numbers of fall cattle peak and with a lack of wheat pasture cattle in the southern Plains this spring, supplies of available cattle to meet the demand created by spring green-up will be tight, which should help propel prices even higher than current levels.

As long as futures markets support profitability for cattle feeders, which appears likely through the end of the year, the picture looks bright for 2011 calf and yearling sales. Last Thursday, midday feeder cattle futures were higher across the board, with fall prices looking particularly good. August feeder cattle contracts were 110 points higher at $136 while September was up 87 points at $135.12. October contracts showed gains of 100 points from the previous close to reach $135 and November was trading 102 points higher at $134.82. Analysts have been suggesting since prices started higher early in the year that cow/calf producers would do well to lock in some profits at these price levels to protect at least a portion of fall marketings. There is still some upside potential in the markets, particularly with the planting season ahead. However, there is also an opportunity for extreme price volatility and downward pressure on calf prices later this year as a result of uncertainty in the world markets, a long corn growing season ahead, and the specter of a possible severe summer drought creeping into the southern and central Plains.

Last week in Oklahoma City, OK, feeder steers sold steady to $4 higher with the best prices noted late in the sale as futures markets traded sharply higher throughout the day. Feeder heifers were called steady while stocker steers and steer calves sold steady to $3 higher. Stocker heifers and heifer calves were steady with moderate to good demand for the offering. The best demand reportedly came on offerings of thin-fleshed calves suitable for grazing.

In West Plains, MO, last week, prices were called uneven with steers in the 550-750 lb. class and heifers over 600 lbs. selling $3-6 higher last Wednesday while other weights were steady to $4 higher. Calves in the 400-450 lb. range sold $6-10 higher with the best demand coming on the weaned and vaccinated offerings. Unweaned and fleshy offerings saw lower demand and pricing, according to market reports.

To the west in La Junta, CO, light steers were steady last week from $150 to $170 while heavier classes were steady to $2 lower from $145-164 on the light run. Lightweight heifer calves were called steady from $130-154. Meanwhile, in Galt, CA, all classes of feeder and stocker cattle traded at steady money. Steers in the 400-500 lb. class brought a range of $155-172 while heifers of similar type and kind sold from $90 to $110. Heavier steer offerings from 600-700 lbs. sold from $130 to $145 while heifermates brought $85-100 last week. — WLJ

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