Export sales drop

Markets
Oct 24, 2011

 

Packer interest improved last week, but $118 bids failed to attract much interest for cattle owners. They continued to hold steady on their $122 offering prices.

 

Last week’s fed cattle market took a step backwards trading mostly $2 lower in the southern Plains at $119 and steady to $2 lower in the northern Plains trading from $119-121, with dressed sales trading $1-3 lower from $187-189.

Futures markets were steady to mixed as futures traders waited for the cash markets to develop most of the week. With packer margins continuing to be in the red, tight cattle supplies were looking for firm cash prices. The sluggish tone to the beef trade and packers not willing to bid on any cattle all week may have prompted softer trade in the futures midweek, according to Troy Vetterkind, Vetterkind Cattle Brokerage.

Some slight positioning was seen ahead of Friday’s Cattle on Feed report, according to analysts. The previous week’s rally showed signs that supplies of U.S. beef are shrinking as demand increases from overseas buyers.

Live cattle futures found some stability the previous week and rallied which should help to draw interest for the feeder cattle market in the coming weeks, according to USDA reports.

Last week, feeder cattle futures for November settlement rose less than 0.1 percent to $1.445 a pound midweek on the CME.

Hedge funds increased their net-long positions in cattle futures and options by 3.7 percent to 101,532 contracts in the week ended Oct. 11, the highest since April 19, data from the U.S. Commodity and Futures Trading Commission showed.

The U.S. herd totaled 100 million head on July 1, the smallest since at least 1973, according to USDA. Final weekly production numbers were expected at 631,000–634,000 head, down from 650,000 head the previous week.

Exports continued to drive prices, according to analysts. The weaker dollar and high feed prices have contributed to fewer days on feed and carcass weights that have failed to reach normal seasonal increases.

U.S. exporters shipped 1.9 billion pounds of beef in the eight months through Aug. 31, up 27 percent from the same period a year earlier, USDA data showed.

Falling 7 percent the previous week, exports remained below the 27-week average and only 3,828 metric tons above the 27-week low. Sales fell 972 metric tons to total 12,957 metric tons.

Export sales were primarily to Japan (4,300 metric tons), followed by South Korea (2,700 metric tons) and Mexico (1,700 metric tons). Japan may increase orders of U.S. beef as rumors spread about Japan lifting restrictions on U.S. beef imports.

Boxed beef sales were steady except for a slight widening of the Choice/Select spread to $19, a new high for the year and the widest spread in five years. Choice cuts were quoted at $185 while Select cuts were at $166.

The previous week, wholesale beef climbed 0.3 percent to $1.85 a pound, the second straight weekly gain, USDA data showed. Prices are up by 13 percent so far this year.
Choice ribs and top butts were in demand midweek with higher prices in both. “All the fireworks in the cash beef trade [midweek] was in the boneless beef complex, where we saw sharply higher prices on all fat and lean percentages of processing beef from both domestic and international sources,” according to Vetterkind. “Ideas of tightening supply of boneless beef due to shrinking cow kills prompted the sharply higher trade in boneless markets. I would expect more of this in the future,” he added.
Caution flags did arise last week as corn futures closed limit up on speculation that the USDA’s Crop Production and World Supply and Demand Reports would be more bullish than expected.
USDA also had beef supplies projected for 2012 at a little over 25 billion pounds, which was 4.9 percent lower than last year, and reduced beef imports of 13.2 percent for 2012 while beef exports for 2012 were to be about 1 percent higher than 2011 levels.
Feeder cattle
The recent rains in some parts of Texas were followed with more dry and warm weather. The movement of cattle off summer grazing, or whatever grazing might be left with the extreme drought conditions, will be completed in a few weeks.
Supplies of feeder cattle continue to drop. Weights are light and marketings will be scattered into the late spring. Winter wheat grazing is limited and not going to significantly improve anytime soon. A 750 lb. steer was selling for $139 cwt. in the southern Plains.
Feedlot operators continue to see their losses grow. Estimated feedlot closeouts in the southern Plains remained deep in the red. For September, the Livestock Marketing Exchange Center estimated returns over total production cost (including cost of feeder animal and interest) was about -$80 per steer.
When comparing this year to 2010, the red ink is the result of higher feedstuff costs. In September closeouts, the cost of feedstuffs for a steer placed at about 750 lbs. was up 66 percent compared to a year ago. The total cost of gain (feed, death loss, interest, etc.) was about $100 per cwt. in September, compared to about $64 last year. This does not include the price of the steer.
Compared to the previous week, feeder classes of calves and yearlings sold mostly steady to $3 higher, with instances of feeders trading up to $5 higher.
Tight numbers and the light fall runs have become very apparent as yearling supplies are evaporating, which should only help and keep demand in place, analysts say. Calf buyers continue to pay steady to higher prices for good quality, weaned uniform bunches with a vaccination program as seasonal health issues are a concern. Demand remains good for long time yearlings and vaccinated weaned calves drawing the most interest, according to analysts.
The northern Plains continues to show very good demand for feeders. Valentine, NE, during their yearling sale, sold 725 head of steers weighing between 750-800 lbs., averaging 783 lbs. with an average price of $147.91, and last Thursday’s calf sale posted impressive sale of nearly 250 head of fancy steer calves averaging 468 lbs. at $190.50.
In Oklahoma, feeder steers were steady to $3 higher in a light test, with full advance under 700 lbs. Feeder heifers were $3-5 higher. Steers and heifer calves were $3-8 higher. Demand for feeder cattle was moderate to good with the least action on a few heavier weights. Demand was good for most calves. The least action was seen on fleshy Brahman cross calves, as outlets for these has narrowed to areas south. Quality improved some over the previous week. The numbers of feeder cattle continued to be limited. Supply included 47 percent over 600 lbs., with 45 percent heifers.
In Wyoming, compared to the previous week, steer and heifer calves sold $2-4 higher, with instances of $5-6 higher; yearling steers and heifers sold steady to $6 higher, with mostly $3-6 higher except yearling heifers in Riverton at $2-4 lower. Demand was very good. Supply was approximately 60 percent steers and 40 percent heifers, of which 38 percent weighed over 600 lbs. Of the total receipts listed, approximately 7,500 head were feeder steers and heifers.
In Montana, stocker steers calves under 450 lbs. sold $15 to $20 higher; 450-650 lb. offerings sold $2 to $6 higher; steer calves over 650 lbs. sold steady to $3 higher. Yearling feeder steers sold steady to $3 higher. Stocker heifer calves sold $2-6 higher. Yearling feeder heifers sold steady to $3 lower. Feeding cows sold steady to $3 higher with full advance on young cows. Bred cows sold mostly steady on comparable sales. Slaughter cows sold $2-5 higher with full advance on lean cows. Slaughter bulls sold steady to $2 higher. Demand was good for all classes. — WLJ

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