After some early week reductions in the number of fed cattle being
harvested, the beef cutout value regained traction last week and rose
more than $5 in a period of three days. Early in the week, Tyson Foods
Inc. confirmed it had closed two plants and reduced the number of hours
being worked at others due to packing house loses caused by poor
movement of beef at the wholesale and retail levels.
The industry’s average margin last Monday was estimated at a negative
$18.65 per head, compared with a negative $18.70 on Friday and a
negative $7.05 a week ago, according to HedgersEdge.com. The cut backs
in harvest to just 106,000 head last Monday were short lived as the
cutout rebounded from nearly two weeks of lower trade. However, by
midweek, packers were hard at work slaughtering cattle after margins
moved back into positive territory. By last Thursday, packers were
averaging $18.05 per head and they harvested an estimated 125,000 head,
despite continued difficulty moving beef loads out of cold storage
warehouses. That compares with 123,000 head for the previous Thursday
and 125,000 a year earlier.
As mentioned, the beef cutout values rose sharply last week as a result
of those slaughter cuts and last Thursday, Choice values again moved
higher to $161.32, gaining 46 cents in morning trade. Select prices rose
$1.45, to $148.40, although volume for much of the week was light to
The difficulty in the packing sector was not carrying over to other
segments of the industry. Early trade in the Corn Belt, Nebraska and
Colorado on Wednesday last week, at prices steady with the previous
week, fueled speculation that when trade finally broke loose, it would
be at better prices.
Early prices were 50 cents higher, from $96-97, with dressed sales
unevenly steady from $153-155. Feedlots in Iowa and Minnesota sold a few
cattle on a live basis at prices steady with the prior week at $96-97.
Dressed sales in the region were called $1-2 higher, from $155-156.
Trading in the southern Plains last Thursday was reportedly light to
moderate at $97- 97.50, which was 50 cents to $1 higher than the prior
week when live sales developed in a range of $95.50-96.50. What a
difference a year makes—during the same week last year, fed cattle
prices averaged $78.37 live and $124.14 dressed.
Cow slaughter rates have started to drop off slightly from the higher
than normal number seen over the past several months. Last week, that
drop added additional support to the surging cow carcass cutout values.
Last Thursday, the cutout added $1.24, to trade during the day at
$118.57. The 90 percent lean was also higher, trading at $149.24, and
the 50 percent at $79.59. Those prices compare with a cow beef cutout at
$107.43 with the 50 percent at $49.27 and the 90 percent at $132.22.
The volatility in the fed cattle markets is expected to continue through
the summer. Weather and beef demand are going to be key considerations
going forward. USDA reported last week that 53 percent of the corn crop
had been planted. However, rainfall totals in the Midwest, which
exceeded seven inches in some places, mean that the crop is going to be
replanted due to erosion and seed rot. These setbacks and delays are
likely to work against the end of the year yields once they are tallied.
Corn prices last week were moving higher and many traders were
reportedly waiting on the first 2007/2008 supply and demand report due
out last Friday. Analysts expected the planting number to remain steady
with the planting intentions report at 12.7 million acres, although many
now believe that number is higher than what will actually make it in the
ground this year as a result of weather issues. December new crop corn
futures last Thursday on the Chicago Board of Trade were trading
slightly lower for the day at $3.61. Meanwhile, cattle futures last
Thursday were doing better. After downward movement early in the day as
a result of funds rolling out of the June contract, prices moved higher
to end the day in positive territory. The higher cash trade and the
upward trend in boxed beef were the major market factors during the
session. June live cattle issues ended the session up 30 points, closing
at $92.70. August gained 40 points and October closed up 65 points,
ending at $92.40 and $96.40 respectively.
Now that most producers have secured the cattle needed to graze summer
pastures and the spring runs in most areas have ended, feeder cattle
prices have stagnated slightly. Although the trend remains higher in
some areas and the Chicago Mercantile Exchange Feeder Cattle index
remains above last year at $106.99, compared to $99.40, numbers of
cattle moving through auction markets have slowed and trends have become
more difficult to calculate.
According to Darrell Mark, agricultural economist at University of
Nebraska-Lincoln, the improvement in pasture conditions over last year
has helped sustain the market in recent weeks with more strong demand
for lightweight cattle for grazing ahead.
“Across the U.S., pasture and range conditions were slightly better than
last year at this time,” Mark said. “Recent rains and good growing
conditions in drought-stricken areas have resulted in some of the best
grazing conditions in years in some localized areas. This should lend
support to the feeder cattle market over the next few weeks as demand
for lightweight calves for grass improves.”
He noted that the good demand and strong prices are despite a 20-cent
rally in the corn market from a sell-off two weeks earlier.
“Last week, however, feeder cattle prices in Kansas were $1.50-2 lower,
but Nebraska prices were stronger, with steer calf prices steady and
yearling steer prices advancing more than $4,” he said. “Interestingly,
the price of dry distillers grain (DDG) in Iowa averaged $2.50/ton lower
last week even as corn increased. Expressed as a percentage of corn
price on a dry matter basis, this is the cheapest DDG price relative to
corn so far in 2007.”
In California, conditions remain much drier than normal and wild fires
have been plaguing the southern portion of the state this spring.
According to Jake Parnell, manager of Cattlemen’s Livestock Market (CLM)
in Galt, CA, grazing conditions in the central valley have deteriorated
to the point that producers are shipping butcher cows and pairs to the
market earlier than normal.
“Out in the west part of the valley, it's been very dry and the grass is
pretty much done. To the east, they got a little rain last week and
their grazing conditions are a little better,” he said. “The runs have
been pretty good, with most of the cattle heading out of state to places
in the central U.S.”
Parnell said prices at CLM have been good for much of the spring and
continue to average relatively high.
“Prices paid for heavy cattle have been very good; light cattle prices
this week were steady,” he said.
Farther to the north in Vale, OR, prices paid for grass calves and
yearling cattle were also reported to be fair and steady. Cattle in the
500-600 lb. range sold between $109 and $121. Those in the 600 to 700
lb. class were $105-115 and seven to eight weight yearlings brought
In Billings, MT, last week, feeder cattle were too lightly tested to
offer any price comparisons. However, demand was reportedly good for
stockers and feeders of all weights. There was also moderate to good
demand for cow/calf pairs. Many of the young pairs were in thin to very
thin flesh condition, however.
In Aberdeen, SD, a good run of more than 2,500 head of feeder steers and
heifers brought prices steady to $1 higher than the previous week with
good demand across all classes of cattle.
Feeder cattle prices in La Junta, CO, were called steady with the prior
week. Yearling feeder steers and heifers were also steady to $1 lower.
To the east in Dodge City, KS, there were not enough steers or heifers
of any weight class for an accurate market test. However, in a very
limited test, steers in a range of 750-900 lbs. were called firm to $2
higher; heifers 700-800 lbs. were reported to be firm to $1 higher.
Despite heavy rain and widespread flooding in Missouri, prices for
cattle on offer last week remained strong. In Joplin, MO, compared to
the previous week, steers under 650 lbs. were steady to $2 lower, those
over 650 lbs. sold steady. Hheifers under 600 lbs. were also steady,
while those over 600 lbs. were $2-3 higher. Demand was called moderate
to good for weaned, vaccinated calves and yearlings, moderate to light
for new crop calves on moderate supply.
In Oklahoma and other portions of the southern Plains, continued heavy
rainfall last week added to the already good pasture conditions and
supported the prices being paid for feeder cattle. In Oklahoma City, OK,
feeder steers and heifers sold mostly steady last week. Stocker cattle
and calves were steady to as much as $4 lower, with a full decline on
six weights. Weigh ups average to gaunt early in the day and mostly
average later, contributing to the price swings. The day's supply
included a larger percentage of number two muscled cattle compared to
recent weeks. Demand good for feeder cattle and light weaned calves,
moderate for others.
The weather picture was similar farther down in Texas, where severe
weather dropped several inches of rain last week. In Abilene, feeder
steers under 600 lbs. were $1-2 higher; those over 600 lbs. sold $1-3
higher. Feeder heifers under 600 lbs. were steady, while those over 600
lbs. brought prices called $1-3 higher.