Fed cattle trade steady, calf prices mostly lower

Apr 22, 2011
by WLJ

Exception remains on the West Coast, where good grazing is pushing prices to new records.

Early fed cattle trade last week was reported on Wednesday with markets showing mostly steady results. Cattle in the central Plains sold at $119 live in Kansas, even with the prior week’s results, while Corn Belt trade came at $190 dressed basis, also steady with the week prior. Trade had yet to develop in Texas at midday last Thursday, but there, too, analysts were predicting the trade would occur at $119 live, barring a change in prevailing market sentiment.

The boxed beef markets last week were trading on the defensive as analysts noted that the demand from both domestic and export buyers was on the wane ahead of the Easter holiday. Although trade is expected to improve somewhat as retailers in the U.S. begin to book products for the Memorial Day holiday at the end of May, the markets have been on the defensive. At midday last Thursday, Choice boxed beef was trading $2.14 lower than the previous afternoon, with composite values sliding to $186.75. Select was down 58 cents at $182.79. The middle meats appear to be holding their ground, but end meats out of the chuck and round were trading lower last week as it appears that export markets are showing some signs of cooling, and the red-hot market for ground beef last week was also tapering off slightly. According to USDA, export sales last week remained strong, but they were down from recent highs. South Korea remained a large buyer last week with sales of 4,900 metric tons, followed by Mexico which booked sales of 2,700 metric tons and Vietnam and Japan, each with purchases of 2,500 metric tons.

Now that it appears packers are seeing export demand take a slight breather, there are indications that there will be a reduction in harvest volumes. Carcass weights are beginning to climb, allowing for additional cuts after a relatively good winter feeding season in terms of cattle performance. For the week ending April 15, USDA reported live cattle weights averaged 1,275 lbs., down 3 lbs. from the prior week’s average weight, but still well above the same week in 2010 when live cattle weights averaged 1,257 lbs. As performance improves through the spring, carcass weights can be expected to climb, causing further reductions in slaughter totals, a trend which could help to back up cattle in feedlots, despite the limited availability, pushing prices toward their seasonal summer low. However, most analysts are predicting summer lows will still be well above recent norms, with most predicting a range in the $105-108 live basis for the year. Futures markets last week were still pricing summer live cattle in the neighborhood of $116 for June and $117 for August.

The profitability seen by feedlots through the first quarter of the year could tighten up through the summer if live cattle prices decline as far as analysts currently predict. Corn prices last week saw some added boost from the continued decline in the U.S. dollar in comparison to other world currencies. At midday Thursday, July corn contracts reached $7.43 per bushel on the Chicago Mercantile Exchange. Even Omaha, NE, corn prices remain high, reported last week at $7.15 to $7.21 per bushel, prices nearly double last year’s $3.47-3.49 cash range.

Corn prices, particularly if they continue higher, could push feedlots to look to other grains such as wheat for feed this summer. In the southern Plains, recent projections show some advantage to switching over to wheat feeding, however, that same advantage does not continue in northern or Corn Belt feed yards, which don’t have large quantities of wheat nearby. In those feeding areas, distillers grains or other feed resources will be far more attractive avenues for lowering cost of gain through the summer. If grain prices aren’t rationed soon and drought continues to hamper grass production through the summer, not only will hay prices be high next fall, calf prices could be at risk, analysts warn.

Feeder cattle

Feeder cattle prices in most parts of the country began to show signs of strain last week with most markets reporting sales which were as much as $3 lower than prior week prices. The ongoing concerns about drought in the southern Plains are taking a significant toll on demand for stocker cattle, and feedlots, too, are cutting back on their willingness to continue purchasing feeder cattle at these high prices, according to market reports.

Although there are still pockets of strong demand and prices remain high, particularly in the far west region, there is an undercurrent of weakness seeping into the market that could continue into the spring unless the southern tier begins to see some significant increases in moisture soon. Reports of dramatic wildfires across much of Texas and other parts of the South are cause for concern as it will cause a sharp drop in demand for cattle in those areas hardest hit by dry conditions. It will also add to the demand for hay, pushing prices higher for those producers who do keep their herds through the drought. If there is a positive in those conditions, it is the strong demand and prices for those cows and pairs which can be shipped to regions with grass coming on this spring.

Already, in the southern Plains, there is a lack of grass which has pushed lightweight cattle into feedlots earlier than normal this year. That has helped to support auction market prices in this area as there are few numbers of available cattle in most markets to meet the needs of buyers looking for feedlot replacements. The same trend has been supportive of prices at a time when they otherwise might have seen sharp declines, had big numbers materialized.

In the auction markets last week in Oklahoma City, OK, feeder steers reportedly sold steady to $3 lower. Feeder heifers traded $2-5 lower than the prior week. Stocker cattle and calves were lightly tested at the sale, however, the limited number of cattle on offer sold steady with the prior week. Demand was called good for stocker cattle and moderate to good for feeder cattle.

Farther west in La Junta, CO, lightweight steers were trading steady from $140-160 while heavier classes of cattle were traded $2 higher from $145 to $161. Light heifers sold from $125 to $140, steady with the prior week while heavy heifer calves traded $2-3 lower from $125-142.

In the Southwest at the market in Prescott, AZ, last week on a small run, steer calves were called fully steady while heifer calves were reportedly $4-$6 lower. Light steer and heifer yearlings were $4-6 lower. Heavy yearlings traded steady. And in Famoso, CA, record-high prices continued for stocker cattle bound for the plentiful grass in the area. Demand was strong and prices for all classes of cattle on offer were steady with the previous week. Stocker steers in the 275-400 lb. class were trading from $130 to $155 while those in the 425-500 lb. range brought $130-152. Stocker heifers from 275-400 traded from $110 to $151 and those in the 425-500 lb. range sold from $110-134.

In Cottonwood, CA, stocker and feeder cattle were strong on a light supply last week with the best demand reported for 550-725 lb. steers heading for grass. As an example, steers in the 600-650 lb. class brought $143-160. — WLJ