Sideways trade expected 'til mid-Sept.

Sep 9, 2013

It was another week of the “put it off ‘til Friday” mentality in the cash trade last week. By Thursday afternoon, barely 6,000 head had been confirmed sold on the negotiated market, for the week-to-date, these being numbers too low day-to-day to set a trend.

Throughout the short week following the Labor Day weekend, packers put in very few bids and most were passed over by cattle feeders anyway. The fact packers were buying for a full production week this week seemed not to matter to their buying momentum.

Analysts predicted trade would be steady to steady-at-best with the prior week’s trade at $122-124 live in the Southern Plains and $195- 196 dressed in the Corn Belt.

“There is nothing really bearish or bullish in the cash markets right now,” said Troy Vetterkind, of Vetterkind Cattle Brokerage, Thursday morning. “Fed cattle supplies remain ample but manageable given the current call. The beef market is moving along at mostly steady money and steady trading volumes. So I don’t see where the market has to be a lot lower nor do I see where the market has to be a lot higher, so call it a good steady go.”

“Steer and heifer carcass weights are now below year ago levels and is evidence of an industry which is becoming more ‘current,’” commented Andrew Gottschalk on a similar vein. “A sharp decline also in August placements will only add to the positive fed cattle supply outlook for the first quarter.”

Vetterkind opined that not much will happen with cash fed prices for a few weeks now and that likely won’t change until the middle or end of the month at best.

“Cash fed cattle lows have been put in and don’t expect the market to break very much, but we may not rally very much either until we get into October-December timeframe.”

Live futures took a downturn last week and were credited with taking feeder futures and even hog futures with them. From the prior- Friday close to last Thursday’s settlement on near-term live contracts, both months lost well over $1. Closing Thursday with $125.23, the October contract lost $1.57, and at $129.12, December lost $1.35. Most of these losses came Wednesday and Thursday.

Rick Kment, analyst with DTN, described the decline as a result of “buyers quickly backing away from the market.” Vetterkind, however, was more specific.

“The Goldman Roll is right in front of us and it looks like we saw some light pre-roll activity in the October yesterday,” he said Thursday morning. “The official roll period will begin Monday. The market continues to chop around as there is nothing new going on in the cash markets and for the most part the market feels comfortable with how the futures are priced given expectations for better cash in the coming months.

“October live cattle got into some trendline support yesterday at $125.50, which should hold us. Maybe we get down into $124 going through the roll, but don’t think as of right now we go much deeper than that. The same type of trendline support shows up in the Dec at $128.50 and would think December finds some buyers down there as well.”

Perhaps nothing much is expected with the cash or futures market, but consumer demand is expected to pick up in the very near future.

“The month of September should benefit from stepped up retail beef features as a result of improved retail beef margins,” said Gottschalk. “Beef features drive beef sales and the month of September should be positive for retail beef sales. This does not dismiss the fact that product values have attained a near term top and will likely decline.”

Choice values were stubbornly up in the face of Gottschalk’s prediction over the course of last week. Compared to the prior-Friday close, Thursday afternoon saw Choice values up 19 cents with $195.86. Select on the other hand declined 75 cents to $181.91. But with the aforementioned improved retail margins, the prospect of declining cutout values might spur on even heavier beef features than is seasonally usual. Only time will tell.

In the mean time, retail purchase of beef has stabilized in what Vetterkind described as being “content to buy beef as their consumer pulls dictate.”

“They don’t really see need to chase after product right now as they see enough fed cattle to process in the near term and consumer demand is basically steady.”

Feeder cattle

Vetterkind said there was nothing much to talk about in the cash feeder market, last week. Demand is good as continued tighter supplies hit the market; i.e. more of the same.

“This will likely change in the coming weeks as we begin to see a few more cattle coming to market as summer grazing season winds down,” he said. “The feeder market is turning into a twotiered market with southern feedlots trying to buy replacement cattle a little lower and northern feedlots still paying higher money for the quality cattle.”

While it might have been more of the same—high prices and tight supplies—it did appear to be more extreme than in recent weeks.

Few markets had trends to quote on yearlings due to light offerings, and the availability of medium and large 1-class (#1) steers was spotty again. That said, the highest prices seen of surveyed sales in recent memory cropped up in Nebraska.

California: At the Turlock Livestock Auction Yard, almost 2,500 head sold in their special feeder sale. The sale was topped at $156 for some Natural Angus steers. In all, beef steers between 700-800 lbs sold for between $125-156. Holstein steers stayed steady at $70-102 for that weight range.

Kansas: At the Winter Livestock Feeder Cattle Auction, over 2,000 head sold. Heavyweight feeder steers were steady to up $1 while same-weight heifers were up $2. Lighter feeders were too few for a market trend, but the feel was called strong on active trade and good demand. There were no #1 steers in the 700s, or 600s for that matter. Offerings of #1 steers occupied opposite ends of the weight spectrum with some under 500 lbs. and some in the high 800s and above.

Missouri: Several thousand head-worth of receipts were reported across Missouri’s many sales, though yearling feeders were few and far between with several sales having none to quote. Only a few had a handful of sales to quote and few stated trends. Where they existed, yearling feeders of both sexes were called up $2-5 with instances of up $10 on heavier, fancier animals. Calves were also poorly tested, but generally mixed across region and by quality. The few reports of mid-700s #1 yearling steers placed them in the $150- 156.50 range.

Montana: At Billings’ Public Auction Yards, 400 head sold to moderate to good demand. Almost halve the offering was slaughter cows, making too few feeders for a market trend. Slaughter cows were called steady to firm.

Nebraska: In Kerney’s Huss Platte Valley Auction, close to 4,000 head sold to ready buyers. Yearling feeders of both sexes sold for $2-4 higher. Light steer calves were up $10 and heavy steer calves were steady to up $2. Heifer calves were generally steady to up $4, but 500-pound heifer calves were going for $8 higher. The sale noted that most calves were “fresh bawlers without precondition shots.” Hands down, this sale saw the highest prices for benchmark mid- 700s #1 steers of all the sales surveyed; 146 head of 732-pound #1 steers sold for an average of $171.18, and 281 head of 774 pounders sold for an average of $163.44. There was no additional information to shed light on the reasoning behind these outside-the-curve prices.

New Mexico: At the Clovis Livestock Auction, 900 head sold to good demand and active bidding. Calves of both sexes were called steady with yearlings too few to set a trend. A few mid- 700s #1 steers sold in the $145-150 range.

Oklahoma: At the El Reno sale, close to 4,000 head sold with demand called good for all classes. Despite the high numbers of receipts relative to other sales, the volume was down considerably for the sale relative to the prior sale, so there were few trends quoted aside from a steady call on yearling feeders. Over 200 head of 740-pound #1 steers sold for $160.92, though the rest in that weight range were calves or noted to be fleshy and sold between $149-157.

For most of last week, feeder futures too were on the way up, but following what Vetterkind called the “reversal type trade” that happened in the live futures market on Tuesday afternoon/Wednesday morning, feeder futures started heading down.

Compared to the nearterm contracts’ prior-Friday closes of $156.92 for September and $158.95 for October, by last Thursday’s settlement both had lost a few cents in the balance. September closed at $156.75 and October closed at $158.80.

Despite these slight losses and the potential for a downturn, Vetterkind wasn’t worried.

“There really isn’t anything going on in the cattle futures market. Live cattle are trading sideways biding time until this week’s cash trade and feeders are range bound and trading at the top end of their range between $155-$160 basis Oct/Nov.” — WLJ