Cattle prices bolstered by exports

News
Dec 9, 2011
by WLJ

Cattle futures markets stabilized last week, showing signs of gains and packers tried to take advantage of the sell off by offering bids at board prices, but most sellers still held firm at $124.

Trading in the southern Plains and Colorado remained at a standstill for most of the week. In Iowa- Minnesota, along with Nebraska, trading was also limited on very light demand.

Two weeks ago, live sales sold at $124 in the southern Plains. In Colorado, live sales ranged from $125-126. In Iowa-Minnesota, live sales sold from $126 -127and dressed from $200-205. Nebraska saw a few dressed sales sold from $195-198, compared to the previous week’s $126.

Packer interest remained light with limited trade in the Corn Belt in a range of $195-$197 into Thursday. Bids in the south Plains were at $118 with most offers at $122.

Last Monday, cattle prices did take a sharp turn downward on the Chicago Board of Trade (CBOT), falling $3 per cwt. to $120.20 for February delivery of slaughterready live cattle and $2.70 per cwt. to $144.35 for January delivery of younger feeder cattle.

The decline followed a 72-point gain in the Dow Jones Industrial Average, surprising analysts. CBOT said “weakness in the beef market in the past week helped to spark selling pressures into the mid-session.”

“I continue to believe we have the futures on the run, and further long liquidation is ahead of the market going into the end of the year and couple this with a softer trend developing in the cash arena, means traders will be looking for any $1-$2 rally as a selling opportunity,” Troy Vet terkind, with Vetterkind Cattle Brokerage said.

Cattle prices have been bolstered by a 30 percent increase in exports. Former Soviet Union nations have doubled their purchases of U.S. beef this year and Japan and South Korea have continued to expand their buys.

“Consumer demand is struggling at the equivalent of $112 fed cattle prices. The sales parade continues to be led each week by ground beef, while muscle cuts continue their struggle that began last spring,” according to Andy Gottschalk with HedgersEdge.com.

Box prices were modestly higher into week’s end. Packers have yet to trim the slaughter numbers as analysts expected. The Choice cutout was quoted at at $191 and select at $174—both up 50 cents.

The spread fell to $17. The Choice/Select spread is expected to narrow in the coming weeks but remain well above historical levels.

Since mid November, the chuck and round primal are down 5 percent and 6 percent, respectively, while ribs and loins are basically flat.

“Middle meats are steady/softer but there is increasing talk about the rib market losing value as we go forward into the month of December,” said Vetterkind.

Wholesale prices for beef are still up 17-24 percent for most cuts, with prices for the 50 percent fat trimmings up 50 percent from a year ago.

Cattle slaughter the previous week was estimated at 666,000 head, up from 565,000 head the prior week and compared to 681,000 head a year ago.

Corn prices continue to soften. The basis in Guymon, OK, $.90 over December contract. Corn is now pricing into most rations at $12.25/cwt.

Omaha cash corn bids were quoted at $6.10 per bushel, 14 cents higher than the previous week. Last year, cash corn was at $5.32 per bushel.

Feeder cattle

Feeder cattle sold mixed across the country as weather and lighter receipts were features in trading. A 750 lb. feeder steer was selling for $145 in the south.

The holiday season is traditionally a quiet time for trading feeder cattle. Some analysts are expecting cattle to be held back until after the New Year for tax planning reasons, but others believe January will still be a slow month.

Some feeder cattle markets continued strong, with prices $3 to $8 higher. Calves were called $3 to as much as $10 per cwt. higher. Some auctions reported lightweight calves at $15 to $20 higher.

Slaughter cows were $2 to $3 higher.

“Many auctions are reporting $20 to $30 per cwt. price spreads between steer and heifer calves under 550 pounds,” says USDA Market News reporter Greg Harrison. “The steer calves are in very good demand and the preference for most buyers at this time.”

Following the Thanksgiving holiday, where many auctions across the country took the week off, many auctions this week are comparing their prices to two weeks ago as the holiday week’s receipts were very light.

Compared to two weeks ago, calf demand was by far the best, especially for feather-weight calves weighing under 450 lbs. selling $6-12 higher with several auctions reporting instances $15-20 higher on mostly calves weighing 300-450 lbs.

Heavier weight calves weighing 500-650 lbs. sold mostly $2-6 higher with yearlings lightly tested and trading mostly steady with spots $3-5 higher.

In Ogallala, NE, the Ogallala Livestock Auction sold 170 head of steer calves the week after Thanksgiving. Selling with an average weight of 431 lbs., they had a weighted average price of $206.08, with two loads of fancy steers weighing 730-750 lbs. selling from $159-162.10.

In Oklahoma, wheat pasture in many areas has improved following recent rains improving winter grazing conditions. Cattle on feed inventories are very manageable with the 2011 calf crop the smallest in 50 years, and looking at an even smaller crop for 2012 has buyers wanting to own feeders at this time.

In the west Plains, compared to the previous week, steers under 700 lbs. were unevenly steady to $2 lower, except 450-550 lbs. sold $2-5 higher. Heifers under 450 lbs. were $2-8 higher, 450-700 lbs. steady to $2 lower. Steers and heifers over 700 lbs. were not well tested. — WLJ

{rating_box}