Boxed beef values pressured
Boxed beef markets fell dramatically last week, putting pressure on fed cattle values and slowing product movement. Packers are expected to reduce slaughter to support the cutout, hoping to reach positive margins.
In the Texas Panhandle, live cattle were trading at $121 closing out the previous week. In Kansas, live sales sold from $120-121. In Nebraska, live sales sold from $121-122 with dressed sales from $196 -198. In Colorado, live sales sold at $121. In the western Corn Belt, live sales sold at $122 with dressed at $196.
Bids were coming in at $118 with offers at $122 in the south Plains. Corn Belt offers were at $123 live and $198-200 dressed.
The February live cattle futures contract settled at $120.32/cwt., down $1.13 compared to the previous Friday. The April contract closed at $124.60/cwt., off 85 cents for the week. The June contract settled at $124/cwt. August ended the week at $126.05/cwt.
The January feeder cattle futures contract gained 95 cents the previous week and settled at $147.30/cwt. March feeder cattle ended the previous week at $149.88 and the April contract settled at $151.20.
“Product values remain under selling pressure with little relief in sight. This market remains in an “oversold” condition which should allow February futures to find support at $119.15 - 119.75,” according to Andy Gottschalk with HedgersEdge.com.
Slaughter was estimated at 560,000 head the previous week, up from 539,000 head the prior week and compared to 640,000 head a year ago. This was up 3.9 percent from the week before and down 12.5 percent compared to a year ago.
Boxed beef prices weakened some. As cow slaughter trends lower, more fed beef will be required for replacement meat. The Choice cutout was quoted at $189 and Select at $178 the previous week.
Boxed beef cutout at midday last Thursday came in at $187, down $1.88 on the day and down from $191 the previous week at the same time. The Choice/Select spread was at $9.
“Beef cutout values displayed little strength during three consecutive weeks of sharply reduced production,” according to Gottschalk.
“Trading down by consumers is evident, with ground beef increasingly providing the foundation for the beef complex. It will be a challenge to hold domestic demand steady with 2011. The largest Y/Y gains in total demand belong to the first half of 2011. In contrast to the previous two years, price gains this year will be the result of lower per capita supply,” he added.
Weekly U.S. beef export sales for the week ending Jan. 5 came in at 6,700 metric tons, compared with the prior four-week average of 3,925, according to CME reports. (This figure does not include carryover from 2011.) Cumulative sales for 2012 have reached 93,100 metric tons, up 9.3 percent from last year’s pace. Included in the cumulative sales figure are the 39.2 million tons of as-yet undelivered sales that were carried over from 2011.
According to the Livestock Marketing Association, yearling feeder cattle markets saw continued strong demand during the first week of 2012.
Compared to the pre-holiday sales of three weeks ago, steer and heifer calves sold fully $5-10 higher with weights under 500 lbs. routinely trending as much as $15 higher. Heavier feeder calves and yearlings weighing over 700 lbs. were firm to $5 higher with instances up to $7 higher, especially on top quality heifers which received stiff competition from replacement heifer buyers.
Buyers entered the new year full of orders and optimism as possession was nine-tenths of the job and crowds remained active right up to the end as calves that were once considered un-merchantable were used to square-up loads.
Direct trade was very slow as country buyers cannot keep pace with auction bidding and asking prices may have justification to be raised several times before the cattle are shown.
Tales of high-priced cattle are told only to be trumped by the guy at the next table, but new all-time record highs were posted on most all classes of feeders at most all locales. Lightweight steer calves are bumping the 2 lb. level across the country and it is just a matter of time before a sizeable group of 5 weight steers actually breaks the resistance point which would officially make the sky the limit.
Word is out that we need to start rebuilding our herds, especially in the droughtstricken areas, and the interest in replacement quality heifers is spiking. Near 200 head of future cows sold in Ogallala, NE, last Thursday, averaging 618 lbs. and $194.65. These are not counting a 32-head group of 530 lb. Red Angus heifers that were bid-up beyond the market, ending up at $1,550 per head and reminding everyone of the old omen that “even gold is only worth so much.”
Reported auction volume had 52 percent over 600 lbs. and 41 percent heifers.
Following several weeks of shutdown for the holiday, trading opened in Oklahoma City with full advances on all classes of cattle, according to analysts. When compared to the last sale three weeks ago, feeder cattle were $5-8 higher and calves $5-15 higher.
Feeder futures set new historic highs this past week. A 750 lb. feeder steer was selling for $149 on the south Plains.
Analysts predict cattle volume at livestock auction markets this week to be heavy, driven by ideal weather and excellent prices. — WLJ