Record high prices

News
Dec 2, 2011
by WLJ

According to USDA reports, cattlemen have much to be thankful for this holiday season with all-time record high prices posted during November on most major cattle and beef products, including; Choice carcass cut-out values, 50 percent lean beef trimmings, live slaughter cattle (including CME contracts), yearling feeder cattle (including the CME feeder cattle index and the Board), and all classes of lightweight calves throughout the country.

This has, by far, been the most impressive market performance in the history of the beef cattle industry and it has happened right in the face of turkey/ham day and the seasonal lull in retail beef featuring and purchasing, USDA reports said.

A midweek stock and commodity rally carried cattle along for most of last week.

The fed cattle market once again climbed atop its record pedestal with live sales $.50-3.50 higher and trading from $123-127.

Cash cattle offers emerged at $125-127 last week, with bids at $121-123.

According to Andy Gottschalk with HedgersEdge.com, trade was slow early in the week with offers at $125-126 live and $202-204 on a carcass basis. Limited bids surfaced at $123 and $202 in the Corn Belt. The best bid in the south was at $121. “We expect trade to be steady with [the previous] week and lower prices to develop,” Gottschalk said.

In the south, cattle owners raised offers to $127 while packers bid at $123. Private forecasts called for larger supplies of cattle last week but show lists remained small.

Markets saw the decline in carcass weights continue, both from recent periods and year ago comparatives.

Packer margins remain in the red, so some traders feel there is still a negative outlook for cash prices, according to CME reports. The estimated cattle slaughter came in at 128,000 head on Wednesday, bringing the total by midweek to 384,000 head, down from 394,000 head the previous week at the same time and down from 390,000 head a year ago.

Box prices softened with Choice cuts reaching $197 this past week—just short of the record set in 2003 but the highest price in eight years. Choice cutout was quoted at $194.50 and Select at $175.50. The spread remained high at $19.

“Product values are coming under increased selling pressure,” Gottschalk said. According to Gottschalk, we could see a drop in cutout value of $4/cwt. by midweek.

“The huge disconnect between retail beef prices and the live market continues. This is a situation that cannot be sustained. Retail prices are set to advance as we have previously indicated. Consumers have shown a reluctance to support current prices. Higher retail prices will only cause sales volume to drop further,” Gottschalk said.

“Beef demand remains a concern as many traders have questioned whether consumers will support beef at such a high price level,” CME reported.

According to CME, February cattle closed sharply higher at the end of last Wednesday’s session, rising to the highest price levels since Nov. 17. The market found support from a more positive outlook for the U.S. and global economies, and from concerns over a winter storm forecast for last week.

Grains continue to rebound with intense competition in export sales from the Black Sea region and Argentina.

Corn prices moved higher midweek. The spot contract moved over $6. Higher oil prices in the past couple of weeks has stimulated ethanol demand. The basis in Guymon, OK, is 90 cents over December contract. Corn is now pricing into most rations at $12.50/cwt.

Feeder cattle

Feeder cattle sold higher as receipts at auction markets across the country fell under last year, according to USDA reports. Heavier replacements were $2 higher and light weight offerings jumped $4-7 higher. Wheat fields in central Oklahoma were ready to receive cattle, one of the few locations offering grazing. A 750 lb. feeder steer was selling for $145 in the south.

Demand remained good, especially for limited offerings of true yearlings and featherweight calves weighing under 500 lbs., according to USDA.

Rare sightings of yearling load-lot consignments being offered for sale were reported in Burwell, NE, and Green City, MO. The Burwell Livestock Market boasted a load of Value Added steers weighing 706 lbs.

at $159.50 and a 40-head lot of 650 lb. replacement quality heifers that brought $158.50.

The weighing and flesh condition of the yearlings at Green City’s Annual Special was not nearly as attractive to buyers as usual because an abnormally dry late-summer and fall caused an additional need for supplemental feeding. However, nearly 600 head of top quality 8 weight steers averaged 852 lbs. at $147.33, with over 200 head that were considered to be fleshy averaging 821 lbs. at $141.60.

Meanwhile, pee-wee calves continue to light up the salebarn scoreboards like the one in Riverton, WY, which quoted near 150 head of top quality steer calves under 400 lbs. which averaged 344 lbs. at $206.36.

According to USDA reports, there’s no reason to believe that these recordsetting prices won’t continue to rise, but the holiday season tends to make folks nervous. The Thanksgiving holiday-interrupted auction volume included 41 percent over 600 lbs. and 42 percent heifers.

In Oklahoma, compared to the previous week, feeder steers were $1-3 higher. Feeder heifers were lightly tested and steady to $2 lower. Steer calves were steady to $2 higher. Heifer calves were $3-5 higher. Demand was moderate to good for feeder cattle despite the downward trends in the cattle futures and stock market. Higher prices and strong demand continue to be fueled by limited numbers. Demand was good for calves. The quality was average to attractive with several thin, weaned cattle in the mix.

In the Washington/Idaho area, receipts were at $4,900, up from $3,600 the previous week, and $800 the previous year. Demand was moderate to good with feeders at 100 percent of the supply. The feeder supply included 33 percent steers and 67 percent heifers. Nearly 91 percent of the supply weighed over 600 lbs.

In Kansas, sales were confirmed on 1,037 steers, 975 heifers and 345 calves for a total of 2,357 compared with 2,998 last week and 3,603 last year. With a very limited supply, steers and heifers were steady, with most area feeder cattle auctions closed for Thanksgiving. Volume includes 83 percent 600 lbs. and over, 17 percent 600 lbs. and under, with 13 percent contracts. Feeder supply was 44 percent steers and 56 percent heifers. — WLJ

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