October 15, 2007
Cash fed cattle trade last week was underway by Wednesday as packers
managed to pressure feedlot asking prices lower in the north. Although
volume was light in the north and not yet established in the south,
prices last week were $2-3 lower in Nebraska at $139-141 dressed, with a
few reported live sales at $89.50. In Iowa and Minnesota, prices were
reportedly $1-4 lower at $138-141 dressed basis, with the few reported
live sales $2 lower at $89. An improving live cattle contract trade gave
the market pause last week as fund buying and technical support pushed
contract trade higher, giving feedlots reason to hold out for better
money on the majority of last week’s trade. On the Chicago Mercantile
Exchange, October contracts gained 57 points last Thursday to close the
session at $94.67, while December tacked on 115 points and February
added 117 to close at $97.77 and $99.57 respectively.
Feedlots are likely to have a good opportunity during the corn harvest
to lock in lower corn prices. Many industry analysts expect USDA to
increase their harvest estimates for this year when the report is
released Oct. 12. In addition to an increase in harvest forecasts, the
world carryover stocks were increased unexpectedly two weeks ago, which
has added more cushion to this year’s estimates and put downward
pressure on corn prices. That, combined with weakness in other grains
and a rising dollar, has caused corn futures to slump, according to
Virginia Tech commodity marketing agent Mike Roberts, who predicts
further weakness in the corn market.
“It might be a good idea to hold off pricing near-term corn inputs if
you can. Corn prices are expected to succumb even more to harvest
pressure,” he said.
Meanwhile, packers finally followed through on their intended harvest
cuts last week, with several dark plants reported or scheduled at
mid-week. Their efforts cut last Wednesday’s harvest number to just
123,000 head, down from 128,000 head a week earlier, but still above
year earlier numbers. For the week-to-date through last Thursday,
packers had harvested 502,000 head, compared to 512,000 the previous
week. However, their efforts were doing little to immediately trim the
large oversupply of beef available to wholesale buyers at offered
prices. Beef supply, given the record-high carcass weights, continues to
be a burden to boosting the boxed beef price. Until something changes to
boost retail demand, packers are not likely to be able to move the
cutout high enough to justify the much higher prices expected later this
fall as a result of the tight supply expectations.
There were two additional concerns weighing on the market last week as
well. The stop and start nature of export markets, South Korea in
particular, and the news of beef recalls aren’t doing anything to help
improve the movement of beef either in the domestic markets or abroad.
Although both problems are likely to be short-lived in terms of their
market impact, neither is likely to bode well for improving demand and
bolstering beef prices.
The boxed beef cutout last Thursday continued its downward trend. Choice
cutout prices dropped $1.55 to trade at $144.23 at mid-day Thursday.
Select lost an additional 74 cents, to trade down to $134.49. However,
those firesale prices spurred bargain hunters at the wholesale level and
movement was good with 197 loads of Choice cuts, 100 loads of Select
cuts, 27 loads of trimmings and 49 loads of coarse grinds trading hands
during the morning. Cow beef markets were mixed last week after a drop
in the number of cattle being harvested. The cow beef cutout was down
slightly from the previous week at $105, while the 50 percent trim moved
more than $1 higher to $51.71 and the 90 percent lean gained $8 from the
previous week to trade at $133.53 last Thursday.
Competing meats will also add problems to the beef market. Pork, in
particular, poses a concern for the beef industry. The September market
hog inventory report showed the largest number of market hogs on record
since USDA began the data series in 1973. That has led to an ample
supply of pork on the market which is favored heavily by retailers as a
result of increases in the price of both beef and poultry, which are up
6 and 9 percent respectively from last year, according to Shane Ellis,
Iowa State University agricultural economist.
“Poultry, in particular, has been expensive enough to drive consumers to
the ‘other’ white meat,” Ellis said. “Competition from poultry is likely
to continue to grow in the coming months as egg sets and chick
placements remain consistently higher than a year ago. Generally, an
increased supply of meat leads to lower prices, and a moderation in pork
prices in the next quarter will be accompanied by additional
Feeder cattle trended lower again this week, following the downward
movement in the fat cattle futures, although few analysts believed the
price depression in the feeder cattle trade would be nearly as severe as
it turned out to be. Demand for lightweight calves that are either
unweaned or have been handled a great deal is very light, something USDA
Market Reporter Corbitt Wall says is likely to continue.
“The spreads between the preconditioned calves and the calves which are
of a plainer type or haven’t been weaned is getting pretty extreme and
will probably get even worse as we get later in the year. Things are
pretty slow demand-wise right now as most farmer-feeders are busy with
harvest, but once harvest is over with, there will probably be a little
pump-up in the market when these guys start bidding again,” Wall says.
“The difference will be that they are only interested in big, black
steers for their feeding purposes, which could keep a pretty big price
gap between them and the smaller calves,” said Wall.
Wall also explained that auction markets are currently flooded with
calves in poor condition.
“There’s so many guys getting burned by calves coming out of drought
areas it’s not even funny; there were so many calves taken off their
mothers early in the southeast, and that flood of sick calves has
reached the major auctions all over the country now. The one thing
buyers are waiting for is a hard freeze when the market for these calves
should pick up just a bit, as it’s easier to straighten the cattle out
once it gets cold,” Wall said.
With a new harvest report due which could drive corn prices further
down, Wall believes the fed cattle will slow or stop their downward
slide in price, and feeders should follow suit.
“There are some guys out there saying the feeders will be bearish after
the new corn numbers come out, but I don’t see how that could happen. I
think that although the price gap between types and kinds of feeder
cattle will stay the same or get bigger, the overall average for a good
steer should jump up just a bit. What will likely keep [feeder prices]
from getting too much higher is the lack of places to put these stocker
cattle. There’s just not going to be any wheat pasture to be had, though
there should be extra corn stalks around,” Wall says.
Superior Video Auction held a sale on Oct. 5, which set a partial trend
for the next week’s offerings at auction markets around the country. A
total of 34,200 head were offered, and moderate trade and demand was
observed. Prices continued to be strongest in the north and south Plains
states, and weaker in the western regions where distances and drought
tend to have a price-depressing effect.
At the Oklahoma National Stockyards in Oklahoma City last week, 8,940
head sold in the Monday feeder cattle sale and compared to the previous
week, most feeder cattle and calves were $3-5 lower, with some instances
of $6-7 lower on fleshy unweaned calves. The demand was moderate, at
best, for all classes of cattle with buyers very selective for kind,
flesh and weighing conditions. The best action continued to be for
calves which have been weaned for longer periods. Much of the wheat in
Oklahoma is already planted and some areas have received rain, but there
is not a great deal of interest in calves to go on wheat pasture. One
lot of 625 lb. feeder steers sold for an average of $117.41, and a
similar lot of the same weight heifers sold nearly 10 dollars lower at
Further east in Joplin, MO, at the Joplin Regional Stockyards, 4,400
head of feeders were sold at last Monday’s sale. Compared to the week
previous, steers under 750 lbs. and heifers under 600 lbs. were steady
to $3 lower, with the heavier weights mostly steady.
Demand and supply were moderate, with the
calf trade being best on weaned, vaccinated offerings. One lot of heavy
900 lb. steers sold at $108.60, with no heifers for comparison of the
same weight range.
Last week at Winter Livestock’s sale in La Junta, CO, 4,656 head sold
where steer and heifer calves under 400 lbs. were steady, while calves
over that weight brought $3-5 less compared to the previous week. Trade
was active, with calves being in moderate to heavy flesh. Some steers
weighing 570 lbs. brought an average of $111.10, and a heavier lot of
steers weighing an average of 862 lbs. were sold for $107.86.
In McCook, NE, last week, steers and heifers under 700 lbs. were steady
to $4 higher, and the trend was higher with good demand for the 2,700
head sold at Tri-State Livestock Auction’s Monday sale. One bunch of
steers weighing 578 lbs. brought $119.35, while heifers of a similar
weight and type sold six lower at $113.32.
A special feeder calf sale was held last week at the Stockland Livestock
Auction in Davenport, WA, where the 4,410 head offered were selling on
moderate demand, with 668 lb. feeder steers bringing $103.44, while
heifers of approximately 620 lbs. were sold for $96.18 in one example.