The cash fed trade developed in a slow trickle throughout the week last week. By Thursday afternoon, over 59,000 head had been confirmed sold for the week at a weighted average of $146.79 live and $233.33 dressed. That was decidedly lower compared to the prior week’s $147-148 live and $240-241 dressed prices.
Packers purchasing cattle late in the week capitalized on strong losses in near-term futures on Thursday. Though light in volume, cash cattle purchases made earlier in the week were much closer to steady with the prior week.
Triple-digit losses plagued near-term live cattle contracts. The April contract lost 65 cents over the course of the week to settle at $144.20, though that came after the single-day loss of $1.55 on Thursday. The June contract lost $1.40 over the course of the week with a Thursday settle of $134.37, with almost all of that loss ($1.25) occurring during Thursday trade. The markets were closed Friday ahead of the Easter holiday.
Despite the downswing in cash cattle and live futures, expectations of demand increases were just within reach.
“Additional gains are likely as Memorial Day pricing gets into full swing,” said Andrew Gottschalk of Hedgers Edge on the topic of product values. “The recovery in the beef cutout will allow fed cattle price to firm post-Easter.”
This expected increase in demand in the coming weeks following Easter and into Memorial Day will, of course, require more cattle to fill orders.
“Packers are going to have to start lining up a bigger kill to deliver on first of May beef feature orders,” noted Troy Vetterkind of Vetterkind Cattle. Last week’s estimate was for a 565,000-571,000 head production rate, compared to the prior week’s 573,000 head production rate.
Over last week, cutout values gained about $3—Choice closed at $225.88 and Select at $215.43 on Thursday afternoon—though still well below the resistance levels of $230-232 Choice as estimated by Gottschalk. He said product values “turned the corner” on prices.
John D. Anderson, Deputy Chief Economist of the American Farm Bureau Federation, pointed out that cutout values have seen a spectacular rise this year from a historical perspective.
“The wholesale beef market enjoyed an extraordinary first quarter this year. The comprehensive boxed beef cutout (averaging wholesale prices for Choice, Select, Branded and other categories of beef) gained a little over 18 percent between the first of the year and the end of March. The performance of the pork cutout was even more exceptional. The pork cutout rose by almost 57 percent over that same time period.”
Increases in wholesale prices translate to retail prices, however, and that can test consumer demand.
“Retail beef prices (all beef series) advanced to $5.36 per pound during March, up $0.09 from February and compares to $4.92 in March of 2013,” reported Gottschalk. “This represents a retail price advance of 8.9 percent versus a 17.7 percent advance year-to-year in fed cattle prices. The current average retail beef price of $5.36 can support a max cash price at $147 (west Kansas) basis.”
He said maximizing retail beef margins at the current per-pound retail prices would require cash fed prices of $129. He said that was highly unlikely given the reduction in beef production this year, and that retailers raising rates to restore their margins is far more likely.
“To reflect the recent west Kansas top at $152, retailers would need to advance their average price to $5.55. An average retail beef price of $5.55 could support cash prices in a range of $134- $152.”
While the likelihood of price advances in retail beef could harm beef demand, the aforementioned gains in the pork cutout stands to help relative beef demand among consumers.
“The recent sharp decline in beef cutout values has placed beef at a significant price advantage to pork, going into the best demand period of the year for beef,” reported Gottschalk, who also pointed out seasonal beef demand improves by 6 percent from April to May.
Domestic demand could be on the way up in the near future, but export demand now is high. Last week saw net beef export sales of 21,900 metric tons, up 18 percent from the prior year and up 42 percent from the prior fourweek average. This was also a marketing year high.
“Grass fever is coming to an end and calf prices should stall,” announced Gottschalk early last week. He did note however that the supply side of the feeder complex remains positive which should hold up prices. Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, on the other hand said that cash feeders are showing weakness.
“Several factors may contribute to weaker feeder prices in the coming weeks. Persistent drought conditions and delayed spring temperatures are both con tributing to growing concern about forage conditions. The clock is ticking on spring pasture and hay development and another 2-4 weeks of delay will limit summer grazing demand and may force some producers to move defensively to ensure forage demands can be met.”
Cash markets last week reported prices for benchmark medium and large 1-class (#1) steers as still holding strong. Prices below mid-$170s were hard to find for steers weighing between 700-800 lbs. and prices in the mid-$190s were more common than in past weeks.
California: At the Cattlemen’s Livestock Market of Galt, feeders over 700 lbs. were called steady while lighter feeders were called steady to down $3. Seven-weight #1 steers sold between $170-194. At the Turlock Livestock Auction Yard, the most recent sale was called solid with strong buyer attendance. Benchmark steers fetched between $160- 194.
Iowa: At the Bloomfield Feeder Cattle Auction, 2,652 receipts were collected. Feeder steers were in strong demand with prices up $3-8. Trade was called active on good demand. Sizable offerings of 7-weight, #1 steers sold between $184-196.25 Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City saw only 2,693 receipts, but still feeder steers were strong. Steers in the 700-800 lbs. range were called steady, with prices ranging from $174.50-184.75, while those over 800 lbs. were called steady to up $4.
Oklahoma: The El Reno Livestock Market saw far more action last week than the prior sale. Feeder steers and heifers were called steady to up $2. No trend was offered on calves, but demand was called moderate to good for all classes. Number 1, 7-weight steers sold between $172.50-185.
Feeder futures followed their live cattle brethren in triple-digit losses on Thursday, which wiped out any gains made earlier in the week. The April contract losses were again the most tame, being down 95 cents over the course of the week with a Thursday afternoon close of $178.55. The May contract, on the other hand, lost $2.02 over the course of the week with a settle of $178.05.
“Highs set earlier this week seemed to attract both commercial selling and spec profit-taking in the light of uncertain growing crop conditions ahead, the discount of deferred live issues, and dry, early spring pasture conditions (especially in the South),” opined John Harrington, DTN Livestock Analyst, on Thursday afternoon.
New Mexico: At the Clovis Livestock Auction, receipts were a little light. Despite that, feeder steers were down $2-3 on lightweights. No trend was available for those over 600 lbs. Lightweight heifers were up $4-5. Seventy-five head of #1, 7-weight steers sold between $167.50-180.50.
Washington: The Stockland Livestock Auction collected about two-thirds the receipt volume of their prior sale. As such, no trends were offered on feeder cattle, though slaughter cows and bulls were said to be $2-4 down. There were no #1 steers reported sold, and no medium and large 1-2 class cattle above 650 lbs.
Wyoming: The Riverton Livestock Auction was also light on sales last week, with only 500 receipts collected. Too few feeder cattle were offered for a trend, but slaughter cows were steady to down $2 and slaughter bulls were down $4. There were no #1 steers reported sold, and no medium and large 1-2 class cattle above 550 lbs.— Kerry Halladay, WLJ Editor