Markets show packers seeing black
Father’s Day produced pretty good beef sales, with no bad weather to mess things up and folks grilled up those grocery store steaks under sunny skies. After the big weekend, the boxed beef cutout stayed fairly solid at $198 and cash cattle sellers had a decent week even though they are still in the red. Slaughter picked up and things have started to look like they are getting back to normal. If all goes well, we should start clearing out the large volumes of cattle starting to build up.
Although we have to wonder what “normal” is, and this spring has been anything but normal. “Normal” generally means rain for the spring and that is something most areas have had little of. I suppose we could look at the good side and say that there is no mud to deal with. But right now, mud would be a welcome sight for most producers and that feeling of slipping across the pen would feel pretty good.
Nonetheless, cattle prices were having a hard time finding a place to settle in for the week’s trade with bids coming in at $114 with offers at $118 in the south Plains. Last week, most cattle were in that $119 range, while the nearby futures markets were trading in the $117. Through Thursday, there was some light live trade at $122 and some dressed trade at $190. Most cattle feeders appeared to be waiting for Friday’s Cattle on Feed Report to come out.
Packers are the current beneficiaries in the market, but that may be short lived. “While packer margins are positive by $48.60 per head at this time, out-front bids for July product will wipe out this margin,” said Andrew Gottschalk, with HedgersEdge.com. Gottschalk expects product values to trend lower into mid-July.
Market analysts were expecting to see cattle on feed dead even with last year and placements up 14 percent from last May. Marketing’s were expected to be up 4 percent with one additional marketing day.
Cattle slaughter picked up prior to Father’s Day with 558,000 cattle going through packing plants. But most market watchers are expecting volume to slow down from last week. Thursday saw the slaughter run at 506,000 head compared to 510,000 from the previous week and 519,000 for the same week a year ago. On Thursday, the slaughter run finished at 128,000, compared to 127,000 one week earlier, and 130,000 the same time the previous year.
Boxed beef sales were moderate with Choice trading at $198 at midweek, but it was getting a little softer towards the end of the week. The next big beef holiday will be the 4th of July, and retailers were lining up inventory. The
Select was at $180, leaving a Choice/Select spread of $18.
There was not much interest in taking a long position in cattle futures. Nearby June was selling $3 under with only a week to go before the end of the month.
The feeder markets continued its free fall as feedlots tried to adjust to the rising cost of feed. Feeder futures dropped $8 while corn prices moved up as much as 60 cents a bushel.
“The cash feeder cattle market remains on the defensive, given higher corn markets, drought-forced liquidation of cattle off summer pasture, and lower futures,” said Troy Vetterkind, with Vetterkind Cattle Brokerage.
Futures were leading the way lower for all replace ment
cattle. Feedlots lowered bids on replacement cattle in line with new price expectations for later this year and new grain prices.
Auction prices were $2-4 lower for most of the week. A 750-pound feeder steer was selling for $151 in the southern Plains.
The rumors of big placements for the Cattle-on- Feed report, plus a bearish tone to outside market forces with a strong jump in the U.S. dollar, helped to pressure feeder markets, according to analysts. Wednesday’s futures closed off 15 to 85. Feeders closed moderately lower, trimmed by follow-through selling and talk of a May placement total as much as 14 percent larger than last year.
The onset of summer put additional pressure on lightweight calves which sold as much as $10 lower
in many southeastern markets, but this was only a small percentage of their value with price levels still near $200 for males.
Reportedly, a good portion of the late summer and early fall feeders are still in firm hands and these backgrounders plan on squeezing until the turnip is dry.
Fortunately, the weather patterns seem to have changed for the good with rain clouds stirring much more regularly across the Midwest.
Nebraska and Iowa farmer-feeders were noticeably more reserved in their feedlot replacement buying last week, but enthusiastic bidding may only be a few more inches of rain away and could culminate at up coming
summer grass yearling auction specials.
The previous week’s reported auction volume included 51 percent over 600 pounds and 44 percent heifers.
At the Huss-Platte Valley Auction in Kearney, NE, over 450 head of top quality 900-925 pound steers sold with an average price of $153.20.
Across Nebraska, steers sold steady to $2 lower and heifers sold mostly steady. Hot, dry, windy weather is starting to take its toll on area pastures. Compared to last year at the same time, Nebraska moved nearly 2,000 head, while this week, it was closer to 7,000 head of feeders. Quite a few older cow/calf pairs are being split
at local auctions and calves are still selling well.
In Wyoming, compared to the previous week, feeder steers and feeder heifers sold steady to $5 lower. The total May auction receipts at Torrington Livestock Comm. Co. were over four times that of May 2011 due to yearlings and pairs coming off grass due to continuing dry conditions and lack of stock pond water. Special Wednesday load lot feeder cattle sales will continue until the sales slowdown.
In California, feeder steers and heifers under 700 pounds were steady to $5 lower. Feeder steers and heifers over 700 pounds were steady to $3 lower. — WLJ