Cattle feeders last week gained the upper hand
in cash trade and were working to move the market higher despite more
slippage in the boxed beef market. Last Thursday, although no trade had
occurred by mid-day, packers were beginning to increase bids to levels
closer to asking prices. In Nebraska, mid-day trade developed last
Thursday at $92 live and $145 dressed basis last Thursday, $3 mostly $3
higher than the prior week. However, many feedlot managers were betting
they could go higher, and were sticking firm to asking prices of $93-94
live and $146- 147. In the south, asking prices were in the $93-94
range. Full trade was expected to develop at $91-92 live and $144-145
Despite trading lower early in the week, live
cattle contracts on the Chicago Mercantile Exchange, followed the cash
market higher last Thursday with the spot month contract leading the
way. August contracts rose $1.15 at mid-day to reach $93.45. October
contracts gained $1.05 to trade at $96.52, while December live cattle
gained 72 points and February tacked on 52 points, trading at $99.32 and
Cutout prices last week rose after some good,
early week beef clearance at the wholesale level. Last Tuesday packers
managed to move about 400 loads of Choice and Select product out the
door, although it took a 50 cent drop in the cutout to get it done.
Demand remains high for beef at the consumer level although, price is a
significant factor in the ability to get it sold despite the looming
Labor Day holiday. Many grocers have been featuring beef alternatives in
advance of the holiday including seafood, pork and poultry as a result
of low margins in beef at prices consumers find attractive. Last week’s
early fire sale could help add to the amount of beef features for the
upcoming holiday. By last Thursday, the Choice boxed beef cutout stood
at $143.65, while Select gained slightly to reach $139.99 at mid-day.
Packers, who had been cutting back harvest
levels in previous weeks increased chain speeds again last week despite
per-head losses estimated at $11.15 by HedgersEdge.com last Thursday.
Slaughter volume for the week through last Thursday was estimated at
500,000 head, above the 491,000 head slaughtered the prior week, but
below the 510,000 head harvested during the same period a year earlier.
Total beef production remained slightly behind the previous week
however, compared to last year, beef production was nearly 18 million
pounds less than the total for the same period. That is a direct result
of the lighter average carcass weights this year. Although average
weight, estimated at 1,275 lbs. live and 784 lbs. dressed, both remain
below last year, which during the same week was 1,277 live and 785
dressed. Analysts note that each additional pound added to the weekly
average is the equivalent of 1,000 head of cattle.
Currently the additional production adds drag to
the beef cutout, however, if the export picture improves, as many market
analysts believe it soon will, that extra production could be quickly
Last week, it was expected that the South Korean
Agriculture Ministry would make an announcement regarding the lifting of
the country’s de facto ban on beef imports from the U.S. Likewise, the
push for Japan to increase the age limit for imported beef to 30 months
could also bear fruit soon. Those two important markets for U.S. beef
could easily add several dollars to the beef cutout in short order.
Since exports to Mexico have started declining this year, additional
market access will become critical to packers and feeders alike who are
looking at rising input prices this fall and winter.
Cattle feeders, in particular those who haven’t
or can’t lock in corn prices for the winter could see their main feed
source fluctuate wildly in price as harvest approaches. Recent corn
field surveys have shown wildly variable yields across the country.
Growers in the eastern portions of the Corn Belt have been hurt by dry
conditions this year and recent rains in much of the Midwest have also
taken a toll on the crop. It will be increasingly important for cattle
feeders to keep an eye on the corn market as harvest approaches.
Northern Livestock Video Auction (NLVA) kicked
off last week with a 35,226 head sale, where very good demand was seen,
with prices higher than the previous month’s sale on almost all classes
of cattle. Steers in the 600 lb. range sold for $118-$125, mostly for
Oct.-Nov. deliveries. Eight-and nine-weight yearling steers went for
$105-115 on good demand.
NLVA manager Ty Thompson said he was pleased
with the sale’s offerings and buyer reception.
“There were a lot of good quality cattle that
went through, and prices were good all the way around.
Mid-to-lightweight steers were $3-4 higher than last month’s sale, and
the heavier yearling steers were usually $2 higher compared to last
month. The only thing that was steady were the heifer calves, but they
weren’t down. We also sold about 2,000 bred cattle, and had some of
those heifers going for as high as $1,450, with the younger cows
bringing $1,200,” Thompson said.
Thompson said that drought didn’t have too much
of an adverse effect on the demand, but that flooding did.
“A lot of these cattle were going to the
Oklahoma area, maybe Kansas or Texas. Good moisture in those places was
creating good demand for some of the lighter weight animals, with guys
planning on taking delivery closer to November when they’d have good
wheat to put these calves out on,” he said. “The flooding in a few
places in those states kept buyers from that area from wanting to take
anything on near or immediate delivery,” explained Thompson.
The NLVA sale also saw sellers getting good
prices for their cows, but Thompson cautioned that it’s a little early
to judge the bred cattle market just yet.
“With corn prices going down and cattle prices
still good, people still seem more likely to take the heifers for
feeding purposes rather than replacements. We’ll probably see more bred
cattle go through the sale in another month and be able to get a good
feel for the cow market then. It should be strong though, especially in
the northern areas. There’s way more hay and standing grass than last
year, and I think people are a lot more optimistic about wintering
cattle in the north this time around,” said Thompson.
Bret Crotts, marketing manager for Schwieterman,
Inc., said that even with drought in some places of the western U.S, and
flooding in some of the plains states, he expects feeder cattle to
remain strong and sees nothing on the horizon to indicate otherwise.
“Feeder cattle are very firm—there’s just no
other way to put it,” joked Crotts. “We have seen some resistance in the
$120 range, and I think we’ll continue to trade just below that level,
but even some of the upturns we’ve seen in corn haven’t broken the
[feeder] market. There’s an insatiable demand for feeder cattle right
now, because there’s a high demand for beef. This last live cattle
summer has been more or less the best ever. We’ve been trading near $1
and have stayed there consistently,” Crotts said.
Crotts did have some concerns about the market,
however, and said that even with prices as good as they have been, many
people are still feeling a pinch.
“The market is great, and that’s true—but
break-even on these cattle is over a dollar in a lot of cases. The
margins just aren’t there. There are definitely some packer-owned cattle
or some value-added cattle out there, and in those cases the higher
input costs don’t matter as much. From the standpoint of a cow/calf
producer, things are great. People who run stocker operations or expose
themselves to the futures market are the ones that should be taking a
look at doing some things differently,” Crotts explained.
The near-term outlook on feeders looks good,
according to Crotts, and he said that prices are likely to stay high as
long as input costs remain elevated.
“We’re starting to see corn trading above the
50-day moving average, which I think is an indication of people
realizing how much the USDA may have over-shot their August corn
estimates. It’s quite likely we’ll see below a 13 billion bushel
estimate for September. Overall, corn is probably going to trend up, and
feeders are likely to follow,” said Crotts.
In Oklahoma City last week, feeder steers and
heifers were steady to $1 higher, with lighter weight steer and heifer
calves mostly $1-3 lower. Demand was good for heavier feeder cattle and
moderate for calves. Heavy rain across much of the central and eastern
parts of Oklahoma caused some flooding in low-lying areas, restricting
livestock movement at the sale. Due to the flooding, receipts last week
stood at 5,717, compared to 7,845 the week prior.
Last week in Hub City, SD, demand was good at
the Wednesday sale. Compared to the week prior, feeder steers and
heifers sold mostly steady to $2 lower, with good attendance and many
consignments offered in load lots. Large #1 steers were at $117-123.50
for 700-800 pounders, and $110.25-121.50 for heavier eight-and
South and east in Vienna, MO, last week’s sale
saw a different offering compared to previous weeks, with a high
percentage of weaned and vaccinated cattle, and also large numbers of
reputation cattle offering proven genetics. Seven-eight weight number 1
feeder steers and heifers were steady to $5 higher, at $111.75-$120.25
and $107-110.75, respectively. Supply was heavy, but only 42 percent of
feeders were over 600 lbs.
In Torrington, WY, last week, demand was good
for the 1,775 head total run, with most weighing over 600 lbs. The
600-700 lb. feeder steers and heifers were selling for $115.75- 118.75,
and large #1 steers in the 800-900 lb. range sold for $106-110.
There was a good run of 1920 head in Cottonwood,
CA, last week, and prices stayed strong on 600-700 lb. steers, which
were selling at $100-110.50, with heifers following at $98-105. Heavier
feeders were $2-3 lower in the steers and heifers, with 800-plus lb.
steers going for $98- 106.50.