Lower prices for fed cattle on short production weeks

Markets
Dec 23, 2013

Packers were reluctant to pay much for fed cattle last week ahead of projections of decidedly short production weeks. With estimates for this week’s production rates ranging widely between 435,000- 480,000 head, and predictions for next week’s standing at 505,000- 545,000 head, packers felt no pressure to collect cattle around them.

This was exacerbated by the prior week’s previously estimated 625,000-head production week being revised down to 608,000. Last week was estimated at 615,000-620,000 head, but due to the slow movement of beef from packer freezers, the possibility exists that the real count will be much lower.

By last Thursday afternoon, most all cash trade had been completed at $129-130 live and $207- 208 dressed, $1-2 lower than the prior year. Cleanup trade was possible on Friday, but at a little over 39,000 head traded, the volumes would be minimal.

Speculation abounded on what cash—and subsequently live futures—will do this and the next couple weeks.

“I wouldn’t doubt the cash fed cattle market drifts down to $128- $130 going through the short holiday production weeks and stays there for a while until beef business picks back up sometime in January,” opined Troy Vetterkind, of Vetterkind Cattle Brokerage.

“I don’t see anything good in the cash fed cattle market for the next couple weeks and while live cattle futures could move a little higher on the backs of higher feeder futures, I believe the live futures are going to have a lot of problems between $133-134 in the Feb. live and $134-135 in the April live. Given what I think the cash is going to do in the next couple weeks, I think Feb. live cattle has risk to move down to $130 and possibly even $128 in the coming weeks and will be trading it that way.

Movements were minimal and mixed in the near-term live futures contracts. December lost 8 cents compared to the prior Friday with a Thursday settle of $131.80. The February and April contracts gained, but at levels that would make the descriptor of “pocket change” very charitable. February gained 13 cents at $132.98 and April gained 28 cents at $134.08.

Despite the supply and demand-related slowness of live prices and stagnant futures, there was good news on domestic demand.

“Consumers have demonstrated a rather surprising propensity to pay more for meat and poultry products at retail with Choice grade and all fresh beef prices rising by 5.9 and 5.1 percent, respectively, pork prices gaining 4.3 percent and composite broiler prices growing by 4.2 percent," noted Steve Meyer and Len Steiner of the CME Daily Livestock Report.

“We expect good beef movement during the holiday period. It has been a long time since consumers received a dividend of any sort like the benefit being realized from lower fuel costs,” explained Andrew Gottschalk of Hedgers Edge. He estimated the fuel-driven savings amount to $10-30 per fill-up and far outweigh the recent reductions to SNAP benefits.

Feeder cattle

Cash feeder cattle performed well despite the lessthan-spectacular movements of the fed cash and futures markets and the reported larger marketing of feeders. Both of these things would suggest lower prices, but all surveyed markets reported decidedly higher money on almost all feeders.

Vetterkind noted, as did many sale reports, that for many feeder auctions, last week was the last sale of the year with many auctions posting warnings that they will not be open again until the second week of January. Vetterkind suggested that this might have effectively been the last action in feeder markets for the rest of the year.

“Talk is that many of the major feeding companies are content with current inventories of newly arrived cattle and aren’t going to chase anything after the recent run-up in the market. So here too attitudes are, ‘We’re going to buy them right or we won’t buy them at all,’ and this could leave the cash index with a little downside risk near term, as well.”

Medium and large 1-class (#1) steers were decently available, both in the calf and yearling models, with prices varying between them in some sales and not at all in others. A lot of attention was placed on bred replacement stock, as well, with sales reporting higher prices where comparisons were available.

Colorado: The Sterling Livestock Commission Company collected 1,174 receipts at their replacement sale last week. Slaughter cows were up $3-5 while slaughter bulls were up $7-8. No price comparisons were available on bred stock as this was a special sale, but heavier #1 bred heifers in mid- to late-term pregnancy were selling for $1,700-2,300.

Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City collected over 3,000 receipts with a mostly feeder sale. Midweight feeder steers sold steady with heavyweights (over 800 pounds) down $2. Demand was called “good” for calves, particularly long-weaned calves, though no trends were quoted. Yearling #1 steers sold in the mid- $160s with #1 steer calves selling in the low $150s. A special bred heifer and cow sale at the Farmers and Ranchers Livestock Commission in Salina saw good demand. Heavy #1 bred cows in their third trimester sold for an average of $2,024.

Nebraska: At the Huss Platte Valley Auction, there were 5,180 receipts, higher than last week but on par with the same week’s sale last year. Steers sold $1-4 higher and heifers were up $2-3. Bidding was called fast on strong demand for the many packages of long-weaned calves. Standard #1 yearling steers in the 700-pound range were solidly fetching prices in the mid- to high-$170s. Calves and fleshy yearlings were bringing midto high-$160s.

New Mexico: The Clovis Livestock Auction posted their last sale of the year last week with 1,836 receipts. Feeder steers and heifers, yearlings and calves, were called $2-6 higher in comparable sales. Slaughter cows were also up $2-4. Trade was called active on good to very good demand. Quoted #1 yearling steer sales in the 700-800 pound area ranged from $157-165.50.

Oklahoma: The OKC West sale in El Reno last week outstripped both the prior sale and last year’s sale in terms of volume with 6,783 receipts collected. With the prior sale having only 1,576 receipts, no trends were offered, but stronger undertones were noted in all categories, particularly for calves. Quoted #1 yearling steer sales in mid-700s ranged from $157-172.

Feeder futures were weak compared to the feeder cash trade. Over the course of the week, the January feeder contract lost 28 cents to settle at $166.80, and the March contract was entirely stagnant, staying steady with a close of $166.55.

“I probably wouldn’t expect much out of these markets for the next several weeks,” concluded Vetterkind. — Kerry Halladay, WLJ Editor


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