Cattle futures decline

Markets
Jan 27, 2012
by WLJ

Anticipation of a higher cash market last week left packers still hunting for lower input costs, creating another late week standoff. Asking prices for cattle varied from $128 in the south to $130 in the north, with show lists slightly larger.

Light to moderate trade volume developed in Texas with steers and heifers marked at $126, steady with Thursday’s advance but $3 higher than the previous week.

Midweek, some auction markets saw fed cattle selling steady to $1 higher. Cattle in Yankton and Worthing, SD, brought $124-126 live and in Tama, IA, $125-130, with tops of $133.

The previous week, live sales ended mostly at $126 in the Southern Plains and in Nebraska and the western Corn Belt, live sales traded mostly from $125-126 with dressed sales mostly at $202. In Colorado for the previous week, live sales traded from $125.50- 126.

Futures closed mixed, up 35 to off 7. The good news is that live contracts closed mostly lower, according to DTN analysts. The bad news is that on Wednesday, nearbys Feb and April ended nearly 100 points below early session highs (many new records were set on the opening). “Aggressive buying near the opening was tied to signs of greater packer spending in the country. Selling surfaced near midsession tied to profit taking and worries that terrible packer margins would force major cuts in chain speed next week,” according to DTN’s John Harrington.

“April cattle pushed sharply lower on the session and to a three-session low as very poor profit margins for packers, plus talk that packers will be cutting back on slaughter until margins improve, helped to spark a fairly aggressive long liquidation selling trend early [Thursday],” CME reported With the beef markets slightly higher, packer margins improved some, on light trade volumes. “Packers are having to kill cattle to fill domestic beef orders coming into the first of February as well as an increase in export orders,” Troy Vetterkind, Vetterkind Cattle Brokerage said.

Boxed beef prices continued higher assisted by two weeks of lower slaughter numbers. The primary feature of recent trading has been the seasonal and historic decline in the Choice/ Select spread. The Choice cutout was quoted at $185 and Select at $180. The spread was quoted at $5.

“The boxed beef market showed some solid gains as business for quick ship of product picked up [Wednesday]. End meats led the charge higher with ribs holding steady and strips showing a little strength. Ground beef continues to be purchased for Super Bowl features but it was said that foodservice demand was a little light. Load counts picked up [Wednesday] to 255 loads, which is somewhat encouraging,” Vetterkind said.

Futures continued to exhibit strength and the cash feedlot trade looks to be no worse than steady with last week’s $126 live and $2.02-2.05 dressed.

Last week’s export sales report showed sales of 19,600 metric tons for the week of Jan. 13-19, which is a pretty decent increase from the past couple of weeks, according to Vetterkind.

Weekly export sales came in at 19,600 metric tons as compared with the prior fourweek average of 6,600 metric tons. This is the highest weekly total since October and the second highest since the second week of July.

Feeder cattle In some areas, feeder cat tle traded $2-4 higher, reflecting the higher fed prices and generally short supply of offerings. The base prices thrown into the index might be subject to volatile moves. A 750 pound feeder steer was selling for $153 on the south Plains.

Most of the feeder cattle midweek, such as Dodge City, KS, Kearney, NE, and El Reno, OK, saw their markets trade $4-$6 higher on the cattle weighing under 600 pounds with the cattle weighing over 600 pounds bringing steady to $4 higher.

Futures closed mixed, up 45 to off 15. Feeders ran out of gas on Wednesday, following the same sputtering pattern set in the live pit, according to Harrington. Deferred contracts held up better than their nearby counterparts. The CME feeder index for 01/19: 150.39, up .19.

In Amarillo, TX, 700-750 pound medium and large feeder heifers sold $2 higher. Slaughter cows were firm to $1 higher, with a limited test on slaughter bulls. Slaughter cows made up 9 percent of the offering, slaughter bulls less than 1 percent, replacement cows 1 percent, and 89 percent feeders. Feeder supply consisted of 56 percent feeder steers and bulls, 44 percent feeder heifers. Approximately 41 percent of the run weighed over 600 pounds.

In South Dakota, feeder steers and heifers were $2 -4 higher, with very good demand for all weights. With cash fed cattle trading higher at $126 and the CME Live Cattle board trading higher as it tries to keep pace with the cash trade, the feeder market moved higher again. Backgrounders remain aggressive buyers of cattle in light enough flesh and weight to develop on grass or grow them slowly in a yard. Auction receipts were large as producers are shipping their cattle to town to capitalize on this feeder market that keeps setting new historic highs. Slaughter cows and bulls were $2-3 higher.

In Washington, Oregon and Idaho, compared to the prior week, feeder cattle were steady to $5 higher in a light test. Trade was slow to moderate with good demand. Winter weather finally came to the Northwest with snow showers reported across the trade area. The feeder supply included 83 percent steers and 17 percent heifers. — WLJ

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