Feeder cattle hit support level

Mar 2, 2012
by WLJ

Market (from page 1)

to be the end result. Especially considering it appears as though the market has the beef packer on the run again this week. It still takes a close over $130 in April live cattle to keep the rally alive to $133-$135 in coming weeks and believe it is only a matter of time before that happens,” says Troy Vetterkind with Vetterkind Cattle Brokerage.

Tight inventories of cattle have hit home for boneless beef processors as culling season is now over and high dressing slaughter cows and bulls are bringing over $100 at auction, well before the peak of grilling season.

“We are approaching a top in beef cutout values. Any pickup in beef production will be followed by an abrupt downward adjustment in the beef cutout. Consumers are voting with their dollars and beef is losing out to the competition,” says Andy Gottschalk with HedgersEdge.com. Production was expected to come in under 608,000 head. Production the previous week was estimated at 592,000 head versus 616,000 head a week before and 655,000 head last year. Beef production year to date was down 5.3 percent from the prior year.

After another light slaughter week, boxed prices continued an upward movement. The Choice cutout was at $199 and Select at $195. The recent advances in boxed prices have restored much of the lost margins of the packers.

“Cash beef prices were mixed [Wednesday]. Middle meats held mostly steady, however, end meats ran into some discounting. It was said that business did pick up a little on the lower market in end meats. There is still talk about the boxed beef market running into major resistance at the $2 level basis the Choice cutout and would look for a sideways type trade going into next week,” Vetterkind said.

Weekly U.S. beef export sales for the week ending Feb. 23 came in at 18,340 metric tons, compared with the prior fourweek average of 29,027. Cumulative sales for 2012 have reached 291,620 metric tons, up 2.7 percent from last year’s pace.

Adequate moisture recently in the Hard Red Winter Wheat region coupled with warm sunshine has popped the bright green wheat pastures and invigorated graze-out opportunities, but many farmers will elect to make a crop this year or, better

yet, harvest wheat hay. Feeder cattle

Feeder cattle hit an important support level and technical traders jumped into the market sending feeder futures up $1.50. The balance of the spring should see tight supplies and high feeder prices. A 750 pound feeder steer was selling for $158 on the south Plains.

The CME Feeder Cattle Index was at $157.12 last Thursday.

Wednesday’s cash feeder cattle market was steady/$2 lower mainly due to increased receipts in the south, according to Vetterkind. “Cattle are moving off wheat on the southern Plains and as a result, OKC had 14,000 head of cattle on offer Monday; Joplin, MO, had 8,000 head of cattle for sale Monday; and El Reno, OK, had close to 12,000 head of cattle [Wednesday],” he said. Vetterkind said this could keep a little pressure on the feeder cattle market into this week.

Compared to last week, feeder cattle sold $1-4 higher with stocker cattle and calves trading $3-10 higher on the heels of the previous week’s new record-high fed cattle trade that boasted a weekly five-area feedlot region weighted average steer price of $128.03.

The sharpest gains were noted on peewee calves (under 450 pounds) in the Southeast as backgrounders near the major central U.S. grazing regions are calling their favorite southern order buyer, after exhausting attempts to purchase lightweights closer to home. Most calf orders are given out in “dollars per head” which has turned up the heat on featherweights (under 350 pounds) in an attempt to stay under the strike price.

Few of us have gotten used to hearing calf prices in the 2 range, now do we need to prepare ourselves for... “dare we say $3/ pound?” Stocker cattle demand does not appear to be cooling off and it looks like we’re headed for an early spring.

The reported feeder cattle auction volume included 53 percent over 600 pounds and 43 percent heifers.

Compared to the previous week, feeder cattle in the Northwest were steady to firm even though some producers were passing on the higher bids. Trade was slow to moderate as most action happened the previous week. Demand remained very good. The feeder supply included 61 percent steers and 39 percent heifers. Nearly 69 percent of the supply weighed over 600 pounds.

In South Dakota, feeder steers were steady to $2 higher, feeder heifers under 700 pounds $2- 4 higher, over 700 pounds steady to $2 higher. Very good demand remains for both backgrounding and feeding type cattle in the area. Slaughter steers were $2 higher, with heifers not well tested.

On the West Coast, market operators were expecting to see some early runs of feeder cattle because of the dry weather, however they received some good rain last week which will temper cattlemen’s desire to market cattle early. Light weight calves were trading between $210 and $2.26 on pen lots last week and 8 wt yearlings were trading up to $150. Their slaughter cow market was $7 softer because of large dairy liquidation. Cow packers are putting those cows on feed before slaughter to get a little white fat on them. — WLJ