Trade was active at midweek last week in the northern Plains with
Nebraska feeders trading cattle $2-3 lower at $150-151 dressed and live
trade down to $94-95 on moderate trade. Southern Plains feeders were
slow to trade and appeared that they would be waiting until late week
before serious trade.
Beef cutouts have held their own, with the Choice cutout holding strong
at $161.35 and Select at $149.09. Trade volume was good and there was a
solid amount of trade in the ground product. The Choice/Select spread
last Thursday was $12.26, and the packer margin index showed packers
earning $20.60 a head.
The market for ground beef has been especially good up to this point.
Good trade in the boxed beef grind and the cow beef markets are very
strong. The 90 percent lean beef was trading at $152.14, very near
record territory, and the 50 percent trim was at $69.07. The cow beef
cutout, which represents the same cuts as the boxed beef cutout, was
trading at $120.75. You can see these markets trickling down to the
auction market trade.
Many markets have reported the price for slaughter cows at very strong
levels. In Montana, high dressing cows were selling for as much as $58,
on the West Coast $55, Wyoming $60, and in Joplin, MO, $63. This may be
the strongest the slaughter cow market has ever been. One northern
Plains auctioneer said he has never sold cows this high.
Another element adding to the value of fed cattle is the drop credit
which, last week, was $10.44. This market has been stuck in the $8 range
for quite some time and has seen some very good movement in recent
weeks. The $2.50 up tick in this market adds $32.50 to a 1,300 lb.
Mike Roberts, extension economist at Virginia Tech, said that, “Cash
cattle and boxed beef prices are seen as declining into early summer now
that the Memorial Day meat buying by retailers is seen as done. Only
time will tell. USDA on Monday put Choice beef cutout values at
$166.49/cwt., up 54 cents/cwt. Packer margins were pushed further into
the black. August/June spreading by funds was noted as lifting the
August contract. Cash sellers are strongly encouraged to get cattle sold
again this week. It is suggested to hold off pricing more short-term
corn needs at this time.”
The export picture is starting to have some impact on the markets. Ron
Plain, economist at University of Missouri, said beef and veal exports
during March were up 14.9 percent with the increase at 20.6 percent for
the first three months of 2007 compared to a year earlier.
Japan’s purchases are up sharply, percentage-wise, but are still quite
small compared to 2003 before bovine spongiform encephalopathy. For
January to March of 2007, Japan’s imports of beef from the U.S. were
only 13 percent of the first quarter of 2003. Beef exports were up 32
percent to Canada, down 8.2 percent to Mexico, up 15.4 percent to the
Caribbean, up 54.4 percent to Taiwan, and up 151.3 percent to other for
the first three months of 2007 compared to 12 months earlier.
Beef imports for January to March were down 8.6 percent from a year
earlier. Our purchases were down 13.8 percent from Australia, down 8.3
percent from New Zealand, about the same from Canada, down 13.3 percent
from Brazil, down 51.7 percent from Argentina, up 19.9 percent from
Central America, down 13.3 percent from Uruguay, and up 29 percent from
The U.S. net import of beef as a percent of production declined from
10.2 percent in 2006 to 8.0 percent in 2007 for the first three months
of the year. This is the major reason for the stronger demand for live
cattle rather than beef.
Feeder cattle prices across much of the country remain strong as a
result of good pasture and forage conditions in most areas and a
continued shortage of available cattle. Last year's drought conditions
had many producers culling deeply and the winter stress on cow herds
means that in some areas, this year's calf crop is smaller than normal.
There have been reports that some producers lost half or more of their
calves this spring. The result is a U.S. herd which is expected to be
stagnant to just slightly larger in terms of growth this year. That
translates to a shortage of feeder cattle and strong prices through most
of this year.
Feeder cattle prices are expected to strengthen some through the summer
months, despite the fluctuations in the corn market, which will likely
limit any substantial upward price moves in feeder cattle contracts on
the Chicago Mercantile Exchange (CME).
Derrell Peel, professor and livestock marketing specialist at Oklahoma
State University, said the corn crop, now that it is mostly planted,
will continue to impact feeder cattle prices through most of the year.
“I think the feeder cattle market will continue to be very sensitive to
corn prices,” he said. “However, for the time being I don’t foresee many
changes, but it hinges on a lot of factors.”
One of those factors was evident in the most recent cattle on feed
report, which showed the trend toward the placement of heavier cattle in
feedlots. The cost of gain is causing feeders to reduce the number of
days on feed in an effort to remain profitable.
"I think we are starting to make a transition in the feedlot industry to
increasing the weight of placements,” Peel said. “There is a trend
toward heavier placement weights, more yearlings instead of weaning age
Adding to the tight supply of feeder cattle is the improved forage
situation which, in many parts of the country, has herd owners starting
to think about heifer retention.
“There isn’t any data yet to indicate that, but I expect that more
heifers are being retained this year, tightening the supply even
farther,” Peel said.
He also expects the U.S. will see a decline in the total number of
cattle being imported to the U.S. Already, USDA data shows that feeder
cattle imports from Mexico for the first three months of the year were
down 29.5 percent from the same period in 2006. Imports from Canada were
up 8.3 percent over last year, however, the import totals from either
side of the border are down more than 11.2 percent from the first three
months of 2006. If those numbers remain at current levels, the prices
being paid by feedlots for available cattle is set to increase
substantially, adding to breakeven prices already pushed higher by
rising feed and fuel costs, spelling rough times ahead later this year.
However, the same scenario holds a much different outlook for cow/calf
producers who can expect good prices into the fall. CME feeder cattle
futures prices for September, October and November 2007 contracts remain
strong, despite some losses across the board last Thursday.
September dropped 70 points last Thursday to end at $111.50, while
October lost 95 points, closing at $110.45 and November lost 102 points,
closing the session at $109.97.
In cash markets last week, the trade was widely mixed with lightweight
cattle headed for grass selling sharply higher in many cases. Heavier
weight cattle also sold well, heading for short feeding periods. In
Salina, UT, feeder steers were mixed last week with weights under 400
lbs. and cattle in the 600-750 lb. range $4-5 higher. Cattle in the
400-600 lb. class were reportedly $1-2 lower. Feeder heifers were also
mixed with weights under 400 lbs. called $6-8 higher. Heifers in the
400-650 lb. range were mostly steady. Those over 650 lbs. were $1-2
lower, except 750 lb. cattle moving $1-2 higher. At Belen, NM, compared
to the previous week, feeder steers sold $2-4 lower, while heifers were
Trends across much of the Intermountain region, from Idaho and Montana,
through Wyoming and Colorado were difficult to determine due to the lack
of feeder cattle being marketed at this time of year. Light runs meant
that most auction markets did not have enough cattle for accurate
comparisons. Farther east, however, runs continue in good numbers from
the Dakotas through Oklahoma. For example, at Hub City Livestock Auction
in Aberdeen, SD, feeder steers and heifers sold steady to $2 higher with
large consignments of high quality backgrounded calves making up the
bulk of the offering. Feeders under 600 lbs. were reported to be lightly
tested at the market.
Farther south in Ericson, NE, compared to the most recent feeder sale of
three weeks ago, good quality, grass type calves under 600 lbs. trended
$6-8 higher, while weights over 600 lbs. trended fully steady. Overall
cattle quality was good, with very aggressive demand.
In Dodge City, KS, last week, feeder steers in a wide weight range of
300-750 lbs. and heifers from 300-700 lbs. were not sold in a high
enough quantity to determine an accurate market. However, a steady
undertone was noted at the sale. Steers from 750-1,000 lbs. were
reportedly steady. Heavyweight heifers, from 700-850 lbs., were called
weak to $1 lower; those in the 850-950 lb. class sold for steady money.
To the east in St. Joseph, MO, compared to the prior week, yearling
feeder cattle and all weights of steer calves sold steady in active
trading, but demand was light for heifer calves under 600 lbs. as they
traded weak to $7 lower. Receipts were fairly light but the offering
included several large drafts of heavy yearlings which were not fully
tested at the previous sale. The market for most classes was well
supported but the price spread between lighter weight steer calves and
their sister mates was much wider than normal.
Farther south, at the auction market in McAlester, OK, last Tuesday,
steer and heifer calves under 400 lbs. sold $3-5 higher. Those in the
400-600 lb. class were reported to be steady to $3 higher. Feeder cattle
were called mostly steady on limited trade. There was good attendance of
buyers, an increase in the number of fleshy new crop calves along with
more plain quality cattle noted in the day’s run.
In Three Rivers, TX, feeder steers and heifers were called steady to $3
higher. A special replacement sale combined with the regular weekly sale
made trade excellent with excellent demand. — WLJ