Winter storms disrupt markets

Dec 23, 2011

Wind and snow crossed the southern Plains twice last week bringing frigid temperatures and blowing snow. Between last week’s weather and the impending holidays, cattle owners seemed more focused on daily operations than sales, but a slight rally on Thursday warmed things up.

During the early part of the week, packers remained firm with asking prices at $122 to $123 in the south and $200 and higher across the north. By Thursday’s close, Packers eagerly paid $198 - 200 dressed and were actively buying in the north. The southern markets remained quiet.

Live and feeder cattle futures extended gains into Thursday’s close. Live cattle closed sharply to limit higher, with feeders closing $2.10 to $2.80 higher. A surge in fund buying lifted futures as buy stops were triggered, according to CME reports. Concerns about stressed Plains feedlots and tightening supplies gave bulls the upper hand. There were reports of $2 higher cash cattle trade in Nebraska with last week´s $118 to $119 trade.

Livestock futures remained mostly lower based on lack of additional momentum in either the cash or wholesale meat values. But nearby contract losses were kept at a minimum as traders focused on the potential market fundamental moves, according to analysts.

Midweek futures closed $5 to $85 lower. Futures closed down $30 to $75 the previous week.

Live cattle futures closed moderately lower, pressured by cash nervousness and technical selling, according to analysts. However, most contracts did manage to finish the previous week significantly above early-session lows, thanks to shortcovering.

The Choice cut-out was quoted at $191.50 and Select at $173.50. The spread was at $18.

Beef cut-outs were mixed midweek with Choice up $.29 ($191.46). Cut-outs closed the previous week higher, up $.91 (Choice, $189.75) to $.98 (Select, $172.76) with moderate demand and light to moderate offerings.

Boxed prices were mixed with small gains in Choice cuts and a dollar loss in Select cuts.

According to analysts, losses were mainly due to lower weighted averages on the rib and loin primal. “There remains some decent near term demand for end meats and ground beef and this will be the supportive factor in the beef trade for another couple of weeks until we get into January,” Troy Vetterkind with Vetterkind Cattle Brokerage said.

By midweek, the weekly kill was running 45,000 head behind the previous week. “This is going to keep some support in the cash beef trade until kills pick back up,” Vetterkind added.

Slaughter numbers continue to drop from slow holiday demand and weather. The previous week’s cattle slaughter totaled 642,000 head, down 1.2 percent from the week before and down 2.7 percent compared to a year ago.

U.S. beef exports during October were up 10.7 percent compared to a year ago and beef imports were down 4.4 percent. October was the 14th consecutive month that U.S. beef exports exceeded imports, according to Ron Plain, University of Missouri.

“We are on a pace to export 2.8 billion pounds of beef this year, well above the 2.518 billion pound record set in 2003,” Plain said.

According to Erica Rosa- Sanko, agricultural economist with the Livestock Marketing Information Center, 2011 saw recordhigh beef byproduct values.

The beef byproduct value, often referred to as the drop, represents the total value of non-meat items.

“Overseas markets drive the byproduct value as foreign consumers have a stronger demand and place a greater value on non-meat items than U.S. consumers,” according to Rosa-Sanko.

Since 2010, byproducts of a steer account for about $12 per cwt., or $160 per head of a live steer compared to a prior five-year average of about $9 per cwt. For cows, that number is slightly smaller at $121 per head.

“Since late 2009, the steer byproduct value has consistently averaged above the prior year reaching record high levels in 2011. In 2011 the byproduct value averaged just over $13 per cwt. on a live steer basis, a 20 percent plus increase over 2010’s. In April, and again in June the steer byproduct value posted a record value of $13.69 per cwt. compared to $10 to $11 per cwt. during the same months in 2010. During the latter half of 2011, the byproduct value softened due to declining oil and feedstuff prices as well as global economic headwinds,” Rosa-Sanko said.

Feeder cattle

Feeder cattle markets were a little firmer going into the end of the week and slaughter cow markets were pretty much $1-$2 higher across the board, according to Vetterkind.

Sales prices last week were mostly at $1.19 a pound live basis in Texas/ western Oklahoma and $1.18 in Kansas. In Nebraska, live prices were mostly from $1.19 to $1.20 a pound while dressed sales were mainly at $1.94 a pound.

The feeder index, a rolling average of sales across the country, is currently quoted at $145, or one dollar higher than January futures. Traders will watch for an increase in offerings following the new year. The holiday season is a quiet time for trading in stocker and feeder cattle. A 750 lb. feeder steer is selling for $145 in the south.

Cash bids for feeder cattle the previous week were mostly $6 lower to $4 higher than the week prior with more markets lower than higher, according to Plain.

Compared to the previous week, feeder cattle weighing over 700 lbs. (which are mostly heavily supplemented long-calves with only a few scattered sales of true yearlings) sold steady to $2 lower.

Calf trends were very uneven and almost erratic, depending on the geographical region, size/sex of the calves, and even the day of the week, according to analysts.

Southeastern calf markets ranged $3 lower to $3 higher with most of the gains posted on lighter weights as western orders continue to assemble grazers for winter wheat pastures. Middle-weight calves (450-650 lbs.) through the Plains and the Midwest were generally $3-5 lower with unseasonably springlike thunderstorms and persistently wet conditions pressuring demand as precondition lot conditions are muddy and sick-pens heavily populated, according to USDA reports.

The steer/heifer spread has partially narrowed from the hugely wide $30-50 ranges that have been the norm through late fall.

Lightweights (under 450 lbs.) are still attracting the most interest as backgrounders are essentially putting their spring stockers together as most expect the availability to be extremely tight in March and April.

Just a few weeks ago, feeder markets near the southern Plains feedlot area had mostly caught up with the traditionally higherpriced northern cattle. But last week, prices north of I-70 started to pull away again with the continually growing interest from farmer-feeders making late-year purchases.

Last Friday, the Ft. Pierre, SD, Livestock Auction sold a load of thin-fleshed 529 lb. steers at $183. — WLJ