Fed trade comes in steady

Markets
Nov 11, 2011
by WLJ

Fed cattle trade remained quiet last week. Iowa saw a few Holstiens trading for $1.80 on Tuesday. Nebraska and Iowa trade on Wednesday saw a few hundred head sold for $123.5-124 live and $1.95 dressed. The few cattle traded in the southern Plains were also steady, with Colorado feedlots selling cattle at $123 live while Texas and Kansas traded light numbers at $119 live.

Market analyst Troy Vetterkind of Vetterkind Cattle Brokerage said he expected feedlots to get bids at $122- 123 live in the south and $1.95-1.97 dressed, providing the futures markets hold. He said futures were showing signs of weakness last week.

The focus of wholesale buyers will soon shift to more traditional November holiday features such as turkey and ham, which will keep a lid on fed cattle and boxed beef prices. Vetterkind said the beef markets have recently been supported by a strong demand for Choice beef, in part because of Walmart’s switch from Select to Choice, but that may be changing.

“I have concerns that the recent Choice beef rally could be losing momentum,” Vetterkind said.

Packers will begin to reduce production levels during the coming weeks, which will add pressure to live prices as packers harvest fewer cattle.

Packers bids came in at $121 in the south, but asking prices remained mostly at $125-126.

“Walmart’s recent announcement that it will begin carrying Choice grade beef in all of its 3,800 U.S. stores will yet again change some key dynamics in the beef sector— from feeding practices all the way back through the seedstock sector,” CME reported.

Since the Walmart surge has begun, the weekly average Choice cutout has gained about $2.50, or $187.52 vs. $185.05 for the week of Aug. 19. Over the same period, the Select cutout has fallen by more than $12.

Boxed beef cutouts were quoted sharply higher last week by USDA on package Choice ribeyes, however, Vetterkind saw signs of weakness.

“There were instances where the USDA was collecting some lower Choice rib transactions, but for the most part, the rib complex remains supported, at least for now. End meats were in need of discounting throughout the chuck and round primals, and this likely remains a feature to the market going forward,” Vetterkind said.

Choice rib primal was $6/ cwt. higher, but according to Vetterkind, talk in the industry was that Choice ribeyes weren’t trading as high as what USDA published.

Live cattle futures were mixed as cash cattle uncertainty and negative outside markets were countered by bullish USDA data. USDA raised its 2012 cash price outlook by $5 on both ends to a range of $117 to $126 in last week’s Supply and Demand Report. Additionally, USDA raised its export outlook for 2011 and 2012.

“Most of the pressure on front month live cattle was due to the Goldman Roll of long December contracts forward,” Vetterkind said.

Midweek futures posted up 15 to 85, boosted by greater packer spending. But traders seemed to be wary of larger fed offerings waiting in the Dec-Feb quarter, according to analysts.

Last week’s cash fed cattle market priced into the futures around the $123 level basis December. “I think that’s why we couldn’t get back up to $124 or below $122,” Vetterkind said.

Feeder cattle Feeder cattle prices continued their upward rally last week, with trade remaining well supported, with limited numbers of yearling cattle and most calves trading $2-4 higher. “It’s been well published that feeder cattle numbers are going to do nothing but get tighter as we go through the end of this year,” Vetterkind said.

He added that any slowing in the fed cattle market could result in feeder cattle doing the same.

Compared to the previous week, steer and heifer calves sold unevenly steady to $5 higher, and yearling feeder cattle traded mostly steady in a light test. The fall run has reached its peak with the largest nationwide weekly auction receipts since the third week of January, according to USDA reports.

Demand remained good for calf offerings but trading activity varied widely as to geographic region with the wintry storms curtailing price levels in the upper Midwest and northern Plains. Sideways snow moved across northern Kansas last Wednesday and strange colors peppered central U.S. radar images, triggering flashbacks of last winter’s misery for some.

The first arrival of the white stuff always causes folks to overreact as they called buyers and pulled back orders on blizzard fears. Six weeks from now, a cold front of this past week’s magnitude might only provoke a flipping-up of their jean jacket collar and a lean of their hat crown into the northwest.

A mirage-like hint of green across southern Plains wheat fields, plus firsthand knowledge of just how deep local herds have been culled, inspired backgrounders to push lightweight calf prices to new all-time highs.

A special Monday auction in Pratt, KS, featured the reputation string of pee-wee calves that gave us one of our first $2/lb. quotes a year ago. The Mule Creek Ranch near Meade, KS, brought in their 60-day weaned calf crop sporting an attractively rugged condition. Just over 100 head of the steers weighed 431 lbs. at $199, while the lightest bunch weighed 359 lbs. at $231.50, or $831 per head for a calf that might unnoticeably slip between your legs on its way to the feedbunk. These calves were quoted to be as much as $12 higher than the previous week.

Last week’s reported feeder cattle auction volume included 32 percent over 600 lbs. and 42 percent heifers.

Trade remained slow in Washington and Oregon, with most local sale barns having special sales.

Oklahoma saw feeder steers and heifers steady to $2 higher, with steer calves $1-3 higher. Demand for feeders was good as the seasonal supplies of yearlings diminish.

In Montana, steer calves sold mostly $4-8 higher. Heifer calves under 450 lbs. sold $4-8 higher; heifer calves over 450 lbs. sold steady to $2 higher. — WLJ

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