Cash market continues upwards

Markets
Apr 8, 2013
by WLJ

There was an interesting game going on in the cash fed market last week. Early in the week, word from packers was that they were going to pull April contract cattle for their needs and avoid the higher cash market. This led analysts to predict a steady to down $1 cash trade. Then later in the week, it became apparent packers didn’t have as many contract cattle as previously thought.

By Thursday afternoon, live cattle sold for $128- 129 and dressed cattle sold at $204-205, a good $1-2 higher than the prior week’s levels for both with the majority of volume having been traded Wednesday and Thursday.

Live cattle futures saw a lot of activity last week.

In what Andrew Gottschalk of Hedgers Edge called a correction, live cattle futures lost $1.32 for the April contract and $1.27 for the June contract on Tuesday alone.

“Cattle futures took it on the chin yesterday with the bears in the marketplace citing the market was overbought and into resistance at $129 in April and $124.50 in June as reasons for selling it,” said Troy Vetterkind of Vetterkind Cattle Brokerage Wednesday. “As is the case in the cattle futures lately it doesn’t take very much to push the market one way or the other and when it does go one way it goes farther than expected.”

Gottschalk called the futures market overbought and that limited near term gains and choppy trade would be the result. By Thursday afternoon, near term contracts stood at $127.10 for April and $122.30 for June, down from $128.90 and $124.37, respectively.

Packer margins were deeper into the red last week after a couple weeks which teased the prospect of per-head gains. Losses were in the lower $30/ head range most of last week. This comes after slight increases in the weekly production rates in the face of still weak domestic demand. The prior week’s production rate was confirmed at 599,000 head, and last week was expected to be 595,000-600,000 head.

Domestic demand is still a problem and beef clearance over Easter was more disappointing than anticipated. Vetterkind pointed out that packers have some decent forward sales booked, but that they won’t come until late April/early May when the pick-up in demand that comes with warmer weather and dusting off the grill strikes. We’re not there yet, however.

“The retail/wholesale buyer remains skeptical about near term consumer demand and as such are only willing to procure beef on an ‘as need basis,’” Vetterkind reported.

Product values were up last week compared to the prior week’s $189.05 for Choice and $188.38 for Select. By Thursday afternoon, the cutouts had gone to $191.72 and $188.25, respectively. But Vetterkind noted that spot sales were light and cut-specific movement was mixed but mostly steady with occasional hints of better movement soon.

Trim prices increased last week. Compared to the prior Friday’s $218.97 for 90 percent and $88.76 for 50 percent, by Thursday afternoon, 90 percent trim had gained only 4 cents at $219.01, but 50 percent trim gained $7.03 with $95.79. Cow numbers are reportedly tight as are supplies of boneless beef from abroad. These things combined with the anticipated demand increase for ground beef are supportive of cash cow prices.

While domestic demand is a key feature to the overall value of the beef complex, export demand is another driver. Most recent information on export sales shows slow movement. Net beef export sales of 10,500 metric tons constituted a 39 percent decrease from the prior week and down 47 percent from the four-week average. Primary destinations were Japan, Mexico, Canada, Vietnam and South Korea.

Feeder cattle

For the most part, people were eager to own feeder cattle last week. Cash prices were up in almost all categories and across all sales.

California: The Golden State saw a lot of active sales last week. At the Escalon Livestock Market, little changed from the prior weeks with medium and large 1-class beef steers weighing between 600-800 pounds going for $115-135 and Holstein steers over 600 pounds going for $80- 100. The change came for high-grading slaughter cows, which slipped $2-3 compared to the prior week’s sale. At the Turlock Livestock Auction Yard, a light test of yearling steers was called strong compared to prior sales on good, active demand with 750-pounders selling between $120- 136.50. At the Cattleman’s Livestock Market in Galt, there was no decent comparison for 750-pound #1 feeder steers due to a light test at the prior sale. They were selling for $124-135 last week. Slaughter cows were up $2-3 and slaughter bulls were steady.

Colorado: The La Junta Livestock Commission Company Inc. sold a light test of yearling steers and heifers, but called them steady to the prior week. Slaughter cows and bulls were also called steady. Demand was good for this offering which was majority slaughter cows and bulls. There were no medium and large 1-class yearling steers near 750 pounds to report.

Kansas: Heavyweight steers sold up $5-7 at the Winter Livestock Feeder Cattle Auction in Dodge City. Heifers of comparable weights were up $2. Lighter weight feeders sold up $8. Over 230 head of mid-700s yearling steers sold for upper $139.

Missouri: The trend in Missouri’s many sales was up—a lot. Yearling feeder steers and heifers were going for up $5-15, though most reports were around the $8-12 area for steers and slightly less for heifers. Some steers in the Farmington sale went for as much as $22 up compared to the prior sale. Calves were also up considerably, posting similar gains for steer calves as seen in the yearling feeders, with peewees going for as much as $20 up. Heifer calves were less desired, though still were quoted up $3-10 with most reports centering around up $5. Slaughter cows and bulls were steady to down a few dollars depending on area. Benchmark steers sold for between $132-146 depending upon area.

Nevada: In the Fallon Livestock Exchange, medium and large 1-class yearling steers around 750 pounds sold for between $110-128. The market reported sales were down for feeders compared to the prior sale due to dry conditions. Fat cows were going for $70-75, and Holstein steers over 600 pounds were going for $65-83.

New Mexico: In Clovis’ Livestock Auction, feeder steers and heifers were up $2-4 while all other classes were steady with instances of up $5 for more attractive cow and bull offerings. Trade was called active on good demand. Sixteen #1 yearling steers weighing 757 pounds sold at $145.50.

Oklahoma: The El Reno sale saw feeder steers $4-6 higher while heifers were called steady to firm on limited comparable sales. The few calves available sold sharply higher but on numbers too light for a market test. Thin-fleshed and weaned calves suitable for grass were especially sought after. Rain in the area has raised spirits of buyers. Eighty-two head of 754-pound yearling steers sold at $141.75. In Union Livestock Market, McAlester, it was a mixed story on calves. Those under 450 pounds sold down $3-5, but those over sold up $8-10 for steer calves and up $3-7 for heifer calves. Slaughter cows were steady to up $3 and slaughter bulls were fully $5 higher. A little over a dozen 763-pound yearling steers sold for $134.23

Wyoming: At the Torrington Livestock Commission Co., feeder steers were selling up $2-6 and heifers were steady to $5. Demand was called moderate to good. A 178-head collection of yearling steers averaging 732 pounds sold for $146.50.

Feeder futures gained but only slightly last week following the prior week’s rally in feeder futures on the heels of sharp losses in corn. Compared to the prior week’s close, by Thursday afternoon last week, the near-term contracts had gained a few cents to stand at $143.80 and $145.80, respectively.

“Feeder cattle futures have yet to fill the gaps left on day charts from Monday at $143.40 in April, $145.07 in May, and $152.25 in August,” said Vetterkind Thursday. “The more days that these gaps don’t get filled I think makes more of a bullish case for the feeder futures going forward.” — WLJ

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