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Monday, February 24, 2014

Fed markets quiet, beef values move up

by Kerry Halladay, Associate Editor

All was quiet on the beef front last week. The same could not be said for the world of pork, however, as the Humane Society of the U.S. fired shots over the bow of the pork industry. Look for more information on that unfolding story in this week’s Beef Bits and next week’s issue of WLJ.

After so many weeks this year of strong selling in the cash fed market, these past few weeks have seen the return to the all-toofamiliar “put it off ‘til Friday” purchasing strategy…if it could be called that.

By close of trade Thursday, only 2,710 head had been confirmed sold for the entire week.

“Best bids around yesterday were $142 in the south and $224 dressed in the north,” reported Troy Vetterkind of Vetterkind Cattle Brokerage on Thursday morning. In contrast, feedlots were pricing cattle at $145 live in the Southern Plains and $146 live and $230 dressed in the Corn Belt. Most of the activity on Thursday was a handful of low choice heifers selling at $142 live.

“The undertone of the market remains steady/firm given smaller showlists, short bought packers, and higher boxed beef markets,” said Vetterkind of the market, despite the less than lackluster activity.

On the topic of the boxed beef markets, it seems you can’t keep a short-supplied market down. After its precipitous crash from late January’s $240 Choice value down to $207.68 on Feb. 14, Choice has been heading back up. Choice closed last Thursday at $214.32, a gain of $6.64 over the course of the week. Select’s gains weren’t so high, but were still respectable at up $4.40 with a Thursday close of $211.36.

The upward moving cutout can be credited to two main things: continued cuts to production weeks and unmet needs for grinding beef driving up the prices of certain cuts.

On the one hand, packers have been continuing to restrict their production rates.

Last week was estimated at being a 550,000-head production week. This comes after the prior week was pegged at 539,000 head, the week before that at 561,000 head, and the week before that at 566,000 head. At no point this year has a production week reached 600,000 head, let alone eclipsed it.

And as another return to an old trend, non-middle meats have regained their spot in the financial limelight. Rounds and chucks, often features of cold-weather beef consumption, have seen their fair share of increased demand, both from consumers and from those scrambling for beef to grind.

“As cow beef continues to make new all-time highs … there continues to be better interest for chuck, round, and thin meats from the steer/heifer slaughter to grind for ground beef,” noted Vetterkind.

Steve Meyer and Len Steiner of the CME Daily Livestock Report described the upward movement of otherwise lower value end cuts as the tail wagging the dog of beef carcass value.

“When comparing the change in four primals (ribeye, loin strip, chuck, and bottom round), two ground products (90 and 50 percent fresh trim), and total drop value to year-ago levels, we see that low value product prices have been elevated while higher value product prices have been flat or negative,” they explained.

“For example, two high value products (rib-eye and loin strip) have spent most of the time since the USDA shutdown about 1.5 percent below their previous year prices. On the other hand, chuck and bottom round prices have been higher by an average of approximately 10 percent, and since the New Year these products’ prices have been 15- 21 percent higher, respectively.

“Fifty percent fresh trim has shown the highest yearover-year growth, averaging an increase of 50 percent compared to the previous year. However, keep in mind that this product was still suffering from post-Lean, Finely, Textured Beef backlash in late 2012/early 2013.”

Over the course of last week, trim values gained handsomely. Fifty percent fresh trim gained $9.15 to settle Thursday at $114.27. Fresh 90 percent trim gained even more, closing Thursday at $247.28, a weekly gain of $14.43.

Live cattle futures were decently active on the nearterm February contract, but otherwise traded mostly sideways last week. From the prior Friday’s close to last Thursday, February gained $2, settling at $142.60. The April contract, however, only gained 78 cents to settle Thursday at $141.88.

“Don’t know if it’s the expectations for the cattle on feed report that weighed on futures yesterday or not but they are acting heavy up here,” commented Vetterkind Thursday, referencing the impending Friday release of the February Cattle on Feed Report (read an overview in next week’s issue).

“April in particular just can’t seem to get anything going above $143 and, as such, we saw a few accounts liquidating long positions yesterday when they slammed the market about a dollar around 10 o’clock. April still looks alright technically holding above $140.50 but if you start getting below that, assume it’s going to trigger further long liquidation and if we start to get below $138.50 it starts to confirm a double top in the market. So really April has a ways to go before it starts to look ugly on the charts, but it does seem to be running out of buyers up here.”

Feeder cattle

Most feeder auctions were recovering from winter storms having canceled or severely limited their prior sales, making trends hard to come by. For those sales that did report a trend, most prices were looking up for all classes of feeders. Most of the medium and large 1-class (#1) steers offered were yearlings with few notes of “fancy” or “fleshy” to be found. Most prices fell in the low-$170s, though regional differences did, of course, exist.

Kansas: In the Winter Livestock feeder Cattle Auction of Dodge City, over 4,500 receipts were collected, nearly double the volume of the prior sale and almost three times the size of the same sale last year. Heavy feeder steers were steady at worst to up $5. Heifers in the same range were down $2 to up $4 with discounts given for heifers over 800 lbs. Trade was called active on good demand, with especially strong interest in cattle suited for grazing. Yearling #1 steers in the 700-pound range sold between $167.66-176.

Missouri: In Missouri’s major sales (not to mention their smaller sales) over 11,000 receipts were collected last week. Feeder steers and heifers sold steady at worst with most sales talking about prices being $3-5 up with instances of $10 higher seen in Springfield for light heifers.

Weighted averages for 7-weight #1 steers ran from $162.91-179.78, though most sales centered on the low-$170s.

Montana: At the Public Auction Yards of Billings an estimated 1,333 receipts were collected. This was twice what the prior or yearago sales were, so no trends were offered. Demand was called moderate to good on the stocker and feeder offering. A 51-head group of 786-pound #1 yearling steers went for an average of $162.92.

Nebraska: The Huss Platte Valley Auction saw a slight decrease in its sales volume last week with only 4,050 receipts. Despite that, prices were good as feeders sold up $3 for steers and up $5 for heifers. Demand was called good on the large variety of cattle offered. Yearling #1 7-weight steers averaged in the mid-$170s.

Oklahoma: The OKC West-El Reno sale saw volumes almost eight times what they were the prior sale, with over 10,700 receipts collected. Due to the wild difference in sale volumes, no trends were given, but sales were described as having a “favorable undertone” on moderate to good demand for the multitude of cattle offered. Heavier 7-weight #1 steers sold for $165.51, while a sizable group of value-added steers sold for $177.50.

Texas: At the Amarillo Livestock Auction, 1,010 receipts were 1,010 receipts more than the winter stormcanceled prior sale, meaning there were no trends offered. That said, a higher undertone was noted for all classes of cattle on moderate to good demand. There were no #1 steers sold in the 700-pound range, but a collection of 690-pound yearlings sold for $174.87 and a handful of 826-pound yearlings sold for $160.50.

Wyoming: The Riverton Livestock Auction was doing well last week relative to its previous sale. Over 1,250 receipts were collected. Though feeder steers made up the majority of the offering, no trends were offered, though it was noted that most of the feeder offering last week were calves, suggesting few comparable sales were available. The two groups of #1, 7-weight calves went for $163.77 for the 772-pound group and $172.65 for the 730-pound group.

Near-term feeder cattle futures were skirting the edge between sideways and slightly up last week. The March contract gained all of 65 cents over the course of the week to close on Thursday with $171.13, while the April contract gained only 45 cents to close at $171.80.

“March feeders still look alright technically holding above $170 and they still have price counts to $175,” noted Vetterkind, who described the feeder futures as not acting well last week. He speculated, however, that the sluggish behavior might have been due to the general inactivity of the cash fed cattle market ahead of the Cattle on Feed report. — Kerry Halladay, WLJ Editor

 
 


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