Fed cattle prices jump $7-8

Markets
Mar 31, 2011
by WLJ

Fed cattle prices skyrocketed last week, gaining $7-8 from prior week levels to trade at $120-122 live basis in the southern Plains while trade in the north came in a range of $121-123 live and at $196-200 dressed. Trade developed last Wednesday with good volume trading hands at those higher levels as futures prices rose and increases in corn prices added additional support.

Packers have been seeing strong demand for beef offerings and supplies of market-ready fed cattle continue to be tight, which has been the ongoing theme for much of the year-to-date period. Packers have also managed to push beef prices higher, despite concerns about consumer demand at elevated price levels, which has helped keep production levels strong. Last week, Choice boxed beef was up at midday Thursday, climbing 41 cents to $188.59 while Select was up 54 cents at $185.45.

Demand from the export markets has helped drive prices higher this spring. The weak U.S. dollar has made U.S. beef a relative bargain and as foreign economies, particularly those in Asia, have recovered, demand has been pushing higher. The problems in Japan have caused demand there to rise as well. Last week, Mississippi State University agricultural economist John Riley and John Anderson, livestock economist for the American Farm Bureau Federation, noted that rather than having a negative impact on demand, the disaster in Japan may have the opposite impact.

"What was seen as a negative two weeks ago, the events in Japan have become a bright spot for live cattle futures trade. Despite the recent uncertainties, cumulative Japanese imports of U.S. beef are currently up 286 percent compared to the average from 2007 to 2010 and it is expected that some portion of the beef supplies currently in the country will spoil, thus creating a need for more imports," they noted. "The market reacted positively to this along with higher boxed beef. Contracts were up near limit on (March 25). Corn futures rose above the $7/bu mark on (March 24) on the two nearby contracts. All ended the week still starting with a six, though, as contract prices slipped on (March 25)."

Beef isn’t the only beneficiary of the strong global demand. Hide and offal prices have also lent some significant support to fed cattle markets. Last week, drop values reached $13.53, a record high, on Wednesday as a result of strong demand from export markets, particularly for hides. That value has added nearly $200 per head to fed cattle prices, helping to drive prices higher counter-seasonally. As U.S. demand for beef begins to ramp up with the onset of spring grilling season, prices should continue higher, as evidenced by the strong deferred month futures prices.

Last week on the Chicago Mercantile Exchange, futures contracts were benefitting from not only the higher cash trade and overseas demand, but also strength in the corn markets, which saw up-front month contracts move limit-higher after a bullish planting intentions report from USDA. The news of lower than expected corn planting intentions pushed per-bushel corn prices above the $7 per bushel mark. That, in turn, helped live cattle contracts trade sharply higher across the board. The April contract added 85 cents through midday to reach $121.40 while June rallied 117 points to $120.75. August added 165 points to trade at $121.95 while October jumped 205 points to $125.22.

Feeder cattle

The strength in fed cattle markets translated to another strong week of feeder cattle sales last week with prices in most markets higher than the previous week’s good levels. There are limited supplies of feeder cattle coming available nationwide and the profits being booked by feedlots on the sales to packers are being used to procure feeder cattle replacements, almost regardless of the cost. Many markets reported prices were sharply higher last week and that was prior to new record cash fed cattle trade last week. After trade developed, feeder markets pushed higher yet again, despite the new rise in corn prices to more than $7 per bushel.

Futures markets also posted more gains that offered cow/calf producers an early glimpse at excellent prices for fall marketings later this year. On the CME last Thursday, the August contract pushed 47 cents higher to reach $141.05 near the close of the session last Thursday. September feeders were the sole declining contract on the board, falling 2 points to $140.25 while October had added 30 points and November gained 35 points to each hit $140 at midday.

Spring runs, although smaller than normal as a result of the southern Plains drought mentioned earlier, have been strong in terms of price and in areas where there is spring grass coming available, demand has been very good for the limited offerings, despite the sharply higher prices. Particularly along the West Coast, where winter and early spring moisture has been plentiful, buyers have been actively seeking stocker cattle suitable for grazing. Last week, the governor of California, Jerry Brown, declared an end to California’s multi-year drought, which undoubtedly helped to improve expectations for the grazing season. Pastures are reportedly in very good condition in the far West and with irrigators expecting good water availability and likely a good hay crop, prices in the western states may have farther to run this spring than in other parts of the U.S. that are facing a dry spring and summer ahead.

Last week in Galt, CA, prices for all classes of cattle on offer were reportedly steady with steers in the 400-500 lb. range at $160 to $188 while heifers in the same class traded from $90 to $110. Heavier 500-600 lb. steers brought $150-167 with heifermates selling from $90 to $105. Heavier steers in the 700-800 lb. class traded from $115 to $127.50.

Meanwhile in Cottonwood, CA, on a light run of cattle, prices were strong for the limited offering of stocker cattle. Steers in the 500-550 lb. class traded from $143-153 while heavy 750-800 lb. offerings brought $120 to $122. And in Madera, CA, four-weight steers sold from $122-150 while five-weight steers traded in a range of $116 to $130 with heifermates in both classes trading $4-6 back.

Farther north in Madras, OR, prices were also strong. At the sale last Monday, steers in the 400-500 lb. range sold from $160 to $180 while 500-600 lb. offerings brought $145-155. Six- to seven-weight steers sold in a range of $128 to $140. Last week in Blackfoot, ID, feeder cattle prices were called $1-2 higher than the prior week’s sale with steers in the 400-500 lb. class bringing $139-159 while heifers in the same weight range traded at $134-154. Meanwhile, heavier 500-600 lb. steers traded from $138-158 and heifers in the same class brought $127-147. Heavier 700-800 lb. steers sold from $114 to $134 while heifers in that class were $10 back. — WLJ

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