Choice movin' on up
The cash fed market last week continued the trend of the prior week—a slow trickle. Minimal bids and a few clumps of non-trendsetting sales occurred through the week. Analysts expected the bulk of sales would occur on Thursday and possibly Friday.
By Thursday afternoon, about 15,000 head had been confirmed sold, adding to the 8,000 head sold throughout the week. With the exception of Texas—where live cattle sold at $125, a dollar lower than the prior week’s live price—nothing in trendsetting numbers. Troy Vetterkind of Vetterkind Cattle Brokerage predicted the downward trends in cash prices will continue.
“Now it is not to say that we will go straight down as there is still some Memorial Day and Father’s Day business that needs to be done. But I think the bottom line is we printed our spring high in the cash two weeks ago…” Andrew Gottschalk of Hedgers Edge had a different opinion. He noted the current composite cutout can support a max cash price at $132. “As such, we believe it is premature to declare a seasonal top in the cash market.”
Futures—called oversold by Gottschalk—were again on the losing side. Compared to their prior Friday closes of $120.45 for June and $120.78 for August, they had slipped 60 cents and $1.18, respectively, as of Thursday, at $119.85 and $119.60.
Vetterkind commented on the bad state of live futures, speaking specifically of the breaking of the “backend” support of $120.
“This opens the door for another leg down in my opinion to where we can now take August live down to $117 and October down to $120… Until then, higher beef, good packer margins, packers increasing kills to meet beef commitments means nothing to the futures trade and we are going to keep moving lower.”
Packers are nicely in the black lately with last week’s profits being at or above $50 a head. Last week’s production rate estimates fluctuated wildly as the week wore on, having started with estimates of 631,000 head then later growing as much as 646,000 head. If this upper level is realized, it would be the peak production for the month, according to Gottschalk.
The big story of last week’s markets was the heights of the Choice cutout. Contrary to the wisdoms of the prior week which stated $206 was likely the topping of the market, last week saw Choice a mere penny off of $209 on Thursday morning. By Thursday afternoon, Choice had settled at 208.77, a $3.79 gain over the prior Friday’s close. Select was also at stratospheric levels, seeing Thursday afternoon at $192.71, a $1.51 gain.
Bolstering these lofty prices is the expectation of continued middle meat procurement for Memorial Day and Fathers’ Day. Even at current retail prices, some holidays demand steak.
The big question on this front is how long consumers will be willing to pay record retail prices. Thus far, their resilience has been staggering, which is a good vote of confidence for true demand, but only so much can be asked of them.
“If product moves well through the Memorial Day weekend, new cash highs cannot be ruled out despite the current ‘bearish’ attitude,” said Gottshalk.
As various parts of the country are facing one or the other side of water-related range woes—too little rain or too much—feeders are being offered more readily as producers are faced with the necessity to continue feeding them rather than turn them out. Feeder steers of the medium and large class 1 (#1) were mixed across the country, but with more places calling them steady to a few dollars lower than otherwise.
California: In the Escalon Livestock Market, #1 steers between 600-800 pounds were steady at $90-118. Holstein steers over 600 pounds were also steady at $70-85. High-dressing slaughter cows were up a good $8 on the top-side of the range compared to the prior sale at $70- 83.50.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City saw feeder steers over 750 pounds generally steady, with lighter steers too lightly tested for a market test. Heifers over 600 pounds were also called steady with the exception of some of the heaviest animals which went for down $1-2. Again, lighter heifers were not well tested. An offering of 63 786-pound #1 steers sold for an average of $133.85.
Missouri: In Missouri’s sales, benchmark feeder steers were more plentiful than in recent weeks. Some sales reported this came from producers selling off feeders they might have otherwise turned out on grass… but there’s the issue of minimal grass right now. Feeder steers were mixed but with a mostly weak/downward undertone. Steady to up or down $2 was the most common quote, but some were as low as down $7 for lights. Yearling heifers were mostly the same, but with the low being down $8 for lights or lesser quality offerings. Calves of both sexes were poorly tested, but quoted at steady at best, mostly down $4. Slaughter cows and bulls, where quoted, were unanimously steady to down $2. Heavier mid-700- pound #1 steers were in evidence and quoted receipts ranged from $120 for 6 head of 757-pounders in the Farmington Livestock Auction to $136.14 for 42 head of 778-pound #1 steers in the St. Joseph Stockyards.
Oklahoma: At the Southern Oklahoma Livestock Auction in Ada, all calves were uneven on a light test. Yearling steers were called steady to up $1, and heifers were just steady. The auction reported all classes had a light test, but buyers were more interested in yearlings than calves. A quintet of 747-pound steer calves sold for $120 while a half-dozen 792-pound #1 yearling steers sold for $125.26. In the El Reno sale, yearling feeder steers were again steady to up $1. Heifers, however, were up $2-4 with the exception of heavyweights which were just steady. Calves were called weak. Almost 200 head of 767-pound #1 steers sold for an average of $133.45.
Feeder cattle futures also suffered last week, dependent as they were on cash fed markets and live futures. Compared to their prior Friday closes, the near-term feeder contracts lost badly, seeing Thursday afternoon at $134.90 (a loss of 48 cents) and $145.18 (a $1.45 loss), respectively.
But at least there were some hopeful words for feeder futures. Gottschalk opined a technical rebound is likely in feeder futures’ oversold condition following the declines. — WLJ