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Monday, June 16, 2014

Fed cattle, feeder cattle move higher

by Kerry Halladay, Associate Editor

Relative to the action in the feeder markets, describing the cash fed trade of last week as in low gear would be generous. That said, trade—once it happened—was decent. By Thursday afternoon, 18,083 head of cattle had been confirmed sold, almost all of them on Thursday, at $148 live in the Southern Plains and $233-235 dressed in the Corn Belt.

“Undertones of the market have firmed as we get into the end of the week with strength in the futures and better than expected beef markets, along with steady/smaller showlists being the main contributing factor,” reported Troy Vetterkind of Vetterkind Cattle Brokerage on Thursday morning.

“There is still some concern that the beef market might falter past Father’s Day and that there will still be a few more cattle around to kill towards the end of the month and this lends to ideas the market might drift lower into the first of July. Time will tell how this plays out and it’s not to say the market is going to collapse, rather we could see the fed cattle market begin to trend a little lower going into the month of July.”

Most of the action in all the markets was restricted to Thursday.

Not only did the bulk of the cash fed trade happen, but both live and feeder futures saw near limit-up trade. Live cattle futures were buoyed largely on the fast-moving, upward currents of feeder futures. Compared to the settlements of the prior Friday, by last Thursday, near-term live cattle contracts had gained several dollars. The June contract settled Thursday afternoon at $146 (up $5.87) and the August contract gained $3.75 to settle at $145.05. A good portion of these gains came from Thursday’s trade alone, as live futures were near limit up in near-term contracts.

For all the excitement of the futures markets and gains made in the cash fed trade compared to the prior week, the beef market was fairly stagnant. The USDA afternoon estimate for Thursday pegged Choice at $230.89, a weekly gain of 3 cents compared to the prior Friday.

Select gained $2.79 to close Thursday with $223.60.

Beef demand by the retailer was a hand-to-mouth affair, where higher prices paid for ribs and some lations of ground ahead of the Father’s Day weekend were offset by discounts offered on loins and other ground options. But consumers were looking to serve Dad beef last week.

“Beef movement ahead of Father’s Day has been a little better than expected but [retail] buyers remain very cautious about taking on too much inventory at the current market,” Vetterkind explained. “There remains a lot of talk among the major beef buyers that the heavier kills may provide some opportunity a couple weeks out to take on inventory at lower money. As such they buy only for immediate needs and look for a pullback in cutouts starting next week.”

Feeder cattle

Feeders were certainly the stars last week, taking center stage, the limelight, the cake, and all other metaphorical tokens of achievement. Neither the futures nor the cash prices were at all shy about $200 prices for benchmark steers. Medium and large 1-class (#1) steers in the 700-pound range regularly brought that and more.

California: Feeder cattle were called steady at the Cattlemen’s Livestock Market of Galt. Number 1, 7-weight steers brought between $185-213. The Turlock Livestock Auction Yard had a specialty bred heifer/female sale, but still brought $170- 207 on 7-weight beef steers and $100-167 on same-weight Holstein steers.

Iowa: In the feeder cattle auction of Russell, volumes were nearly a quarter of the prior week, making for difficult comparisons. That said, the trade in light (500 lbs. or less) feeders was said to be generally lower, with steers down $3-5 and heifers down $6-10. Heavier feeders were another story, however, with steers up $2-4 and heifers steady. The few 7-weight steers sold went for between $190.25-193.

Kansas: At the Winter Livestock Feeder Cattle Auction of Dodge City, 7-weight feeder steers and larger sold up $6-10 with a limited test of heifers selling up $8-10. Calves were too lightly tested for a trend. A group of 38 719-pound steers sold for an average of $215.56, while a handful of 711-pound steer calves sold for an average of $203.

Missouri: The numerous sales of Missouri collectively amassed over 10,000 receipts last week. In the Carthage- Joplin Regional Stockyards, #1 7-weight steers sold between $190-210, and at the West Plains-Ozarks Regional Stockyards feeder steers were up $5-10 with benchmark yearlings going for $196-210.

New Mexico: In the Clovis Livestock Auction last week, receipts were half of their usual volume. Despite that, feeder steers under 600 lbs. were called up $13-14, while heavier steers were up $5. Heifers were called up $2-4 on limited availability. A little over two dozen head of 781-pound #1 yearling steers sold for an average of $193.34.

Oklahoma: Sales volumes were light across the Oklahoma sales, but that didn’t depress the prices. In the El Reno Livestock Market, feeder steers were called up $6-9 with instances of up $12-15 for steers over 800 lbs. Heifers sold up $9-10 with calves too few to set a trend. Receipts on #1, 7-weight yearlings ranged from $200.50- 210 with averages in the higher end of the range. At the Union Livestock Market, everything was up. Steer calves were up $2-6, heifer calves up $6-10, yearlings were too few for a proper trend, but said to be strong on very good demand. And finally at the Oklahoma National Stockyards, feeders saw prices up $3-6 with instances of up $8-10 on steers over 800 lbs. and heifers over 700 lbs. Prices on 7-weight, #1 steers ranged from $189.50 for some heavy, fleshy yearlings to $210 for some 711-pound yearlings.

It is hard to say which was more impressive in the feeder world last week. Despite repeated descriptions of the feeder futures as extremely overbought, both near-term and deferred contracts made a spectacular showing of themselves, particularly late in the week. Thursday alone saw all contracts on the board gain at or near limit up. Much of this activity and aggressive support was attributed to “tight market fears and outside market direction” by DTN’s Market Analyst Rick Kment.

“The focus on tight cattle supplies still is drawing additional market traction, but very little new information is available to the market. This may cause traders to get tired of the fear tactics focusing on lack of cattle numbers, but for now traders seem to be still on board with aggressively priced markets,” he said midday.

The outside market activity he mentioned may have referred to any of the major market indicators—the Dow, NASDAQ, S&P 500, and the 10-year Treasury bond rate— were all down, and in some cases down significantly on Thursday.

By the close of trade on Thursday, near-term feeder futures contracts had gained well over $5. The June contract gained $5.32 over the course of the week ($2.98 of that gained on Thursday alone) to settle at $205.85, and August settled at $206.53, a weekly gain of $5.65.

“It now becomes hard to determine how much more is left in the feeder trade as they have met all traditional price counts and projections,” commented Vetterkind, having earlier opined that feeders can’t keep going up.

“Regardless, if you’re a producer and have feeder cattle to market for the balance of the year, I think you have to get some hedge protection here. I am not saying to try and pick a top and sell futures rather just go and spend $2.00/cwt and buy a put under the market to establish a floor price and let the market do what it wants.” — Kerry Halladay, WLJ Editor

 
 


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