Fed cattle down $4

Markets
Mar 9, 2012
by WLJ

Cash live cattle markets were in trouble after last Monday’s futures markets closed sharply lower, offering no support to cash trade for the balance of the week. Cattle feeders were eager sellers on Tuesday, concerned that markets could move even lower during the week and that $127 would be about it for the week’s trade. Feeders traded large volumes of cattle Tuesday at $127 live and Wednesday’s cleanup trade was a dollar lower at $126. Cash fed cattle prices were reported in Kansas at $126- 127, in Nebraska at $2.01- 2.02 dressed, in Iowa at $2.01- 2.02 dressed, and in Texas at $126, and there was little trade reported in Colorado.

With market attention focused on futures this week, Troy Vetterkind with Vetterkind Cattle Brokerage believes the cattle market will remain steady to lower for the week. “I don’t see a reason for packers to chase cattle right now as domestic beef demand is still a little lackluster and export demand settled back a little last week as well. I think packers will have enough cattle to choose from in the coming 2-3 weeks to satisfy their near term needs until the first of April when we can see another rally in beef prices and subsequently cattle price,” Vetterkind said.

Boxed beef markets were steady last week, with the Choice cutout closing 58 cents lower at $197.53 and the Select cutout closing 33 cents higher to settle at $195.08 on Wednesday.

Improving packer margins and the need to fulfill forward contracts boosted production numbers last week. Beef production last week was estimated at 621,000 head versus 592,000 head the previous week and 645,000 head last year.

Carcass weights still have some market analysts concerned about feeders holding too many market ready cattle. Steer weights are running well above year ago levels. Dressed steer weights for the week ending Feb. 18 were quoted at 854 pounds per carcass, up 2.4 percent from a year ago. Total cattle carcass weights for the week ending March 3 were 788 pounds (this also includes heifers and cows), up 2.2 percent from a year ago.

Market (from page 1)

Overall beef production for the week was 488.5 million pounds, 1.37 percent lower than the same week a year ago, CME reported.

“Carcass weight data continues to confirm that this industry is losing “currentness.” According to Andy Gottschalk with HedgersEdge.com, “Steer carcass weights are 20 pounds above the previous year, while heifer weights are 18 pounds over year ago levels. That said, the previously outlined economic incentives for producers to defer marketings remain in place. Open interest action continues to demonstrate funds’ appetite for the cattle complex. The increase in open interest through the previous Thursday’s trade approximated the sharp increase scored last year, prior to the April top—caution is warranted. The cattle sector tend to feel that it is bullet-proof.”

Significant amounts of boxed beef trade on the domestic market remain light at this time. If there is a concern, it would be not from a point of where it trades, which is very important, but how much product is traded. Hopefully as we see warmer temperatures in March, the grills will be coming out of hibernation and meat sales will increase as spring arrives.

Spring-like weather did hit some areas, boosting buying interest in ribs and loins. Boneless beef and ground beef were called mostly steady. “In all though, the recent surge in cattle and beef prices has still turned some buyers off both in domestic and export channels. Last week’s export sales were off 19 percent from the previous week and 43 percent below the 4 week average. This would lead me to believe that we could see beef prices break another $5-$7 in the next 2-3 weeks before attracting more buying interest coming into the first of April,” Vetterkind said.

Futures were oversold heading into last Thursday, but according to Vetterkind, “We are going to see continued fund liquidation into the last half of March and rallies in the futures will still be met with sell orders. Feeder cattle markets were fully $2-$4 lower last Wednesday at the major auction markets. I would expect that type of trend to continue through the beginning of this week given what has gone on in the futures market this week.

“Early on we saw continued fund liquidation in the market as evident with live cattle open interest going down another 4,200 contracts and feeder cattle open interest going down another 230 contracts. Hogs were no different with OI there going down 6,500 contracts. Also pressuring markets was the Goldman Roll of April longs into June in cattle and hogs. April/ June live cattle traded over 13,000 contracts on the screen throughout Wednesday. Late in the day though we saw a big turnaround in the spread as April live cattle approached some near term support at $125,” Vetterkind said.

“I still think we have broken the markets technically enough that we are still going to see selling above the market for the next couple of weeks. I still think you can sell rallies in April live cattle back to $128 looking for $122, June live cattle at $126 looking for $120, and May feeder cattle at $160 looking for $153.”

U.S. beef exports were 7 percent higher when compared to the same period a year ago, according to CME. Weekly U.S. beef export sales for the week ending March 1 came in at 10,700 metric tons midweek, compared with the prior fourweek average of 18,333.

Weighing heavily on producers is the continued rise in oil and fuel prices and the potential impact it has on the beef market. Gasoline has increased as much as 25 percent in some areas, in less than a month, and most expect it to continue its climb into the summer months. Some market analysts are calling the higher gasoline prices the “wild-card” that could place significant downward pressure on beef demand during the summer months, when money-strapped consumers have to grill hamburgers instead of steaks so they can fill their gas tank.

Feeder cattle

The Oklahoma City auction was $1-3 dollars higher on feeder cattle and $5 higher on calves, but markets showed signs of weakness by Thursday. The feeder cattle index is $157.50 or $4 higher than the March futures board. Auction receipts continue to lag last year and are expected to decline further into the late spring. A 750 pound feeder steer was selling for $157 on the south Plains.

Compared to the previous week, feeder cattle sold mixed, with some of the larger auctions at the first of the week steady to $2 lower; but in some cases, markets saw a wide spectrum of prices, ranging from $5 higher to $5 lower on calves.

There were several auctions throughout the Plain states trading steady to $2 higher. The most advance was in Pratt, KS, where they sold near 5,900 head with 94 percent of the receipts weighing over 600 pounds, as 600-800 pound steers sold $2-4 higher. There were 220 head of thin conditioned steers weighing 820-825 pounds selling with a weighted average price of $160.30.

The southeastern calf markets saw very uneven trade as well, with most auctions trading steady to $3, some marketing areas were $5-8 lower.

In Moses Lake, WA, compared to the previous week, feeder cattle sold steady to $3 higher. Trade was slow to moderate. Demand was moderate to good as some feedlots in Idaho are full and out of the market for immediate delivery. The feeder supply included 89 percent steers and 11 percent heifers. Nearly 92 percent of the supply weighed over 600 lbs.

In Texas, feeder steers and heifers sold mostly steady to $5 higher, except in San Angelo, where feeder steers were up to $2 lower. Slaughter cows sold steady to $5 lower, with a limited test on slaughter bulls. Demand for light weight calves continues well, as stockers in many marketing areas received needed rainfall over the last couple weeks. — WLJ

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