—Analysts encourage caution, expect near-term weakness.
Live cattle trade began at mid-week last Wednesday with prices steady to
higher than the previous week. Sales last week in the northern Plains
trended steady from $95 to $95.50, with dressed sales steady at $150 in
Nebraska and steady to $1 higher, from $150-151, in Colorado. Live sales
in the southern Plains were fully steady from $95-95.50, with dressed
sales reported in Kansas $1 higher at $152. Western Corn Belt fed cattle
trades last week were steady from $94 to mostly $95 on the live side and
steady to $2 lower from $148-150 dressed.
Much of the credit for last week’s climb in the cash market was a result
of a surge in boxed beef prices from the previous week as demand picked
up and retailers began looking ahead to the holiday season. The
likelihood of short supplies of product had Choice boxed beef prices
pushed higher last Thursday. At mid-day, Choice was mostly steady at
$150.93, while Select product moved at $136.62. Those prices were $2-3
higher than the previous week and an advance of $7 from two weeks
Some of the bounce in boxed beef prices came as a result of a
holiday-shortened production schedule two weeks ago and a production
shortfall as a result of a fire at JBS-Swift’s Grand Island, NE, plant,
which broke out Nov. 24. The reportedly minor electrical fire shuttered
the plant for three days and lowered the week’s production farther than
expected last week. For the week-to-date total slaughter through last
Thursday, packers had harvested 505,000 head, well above the prior week
total of 390,000 head and the 491,000 head total for the same period in
The Chicago Mercantile Exchange last week was working against the cash
market, moving lower for much of the early portion of the week. At the
closing bell last Thursday, December contracts were 42 points lower than
the prior day, ending at $94.57. February traded down 40 points to close
at $96.65 and April lost 22 points to close the session at $97.70.
However, despite the gains in the boxed beef market and steady live
cattle trade last week, analysts were adding caution to the market last
week, encouraging the timely sale of any market- ready supplies. The
market needs to be on the lookout for a lower trend in the short-term,
said Virginia Tech Commodity Marketing Agent Mike Roberts last week.
“Prices were pressured by some hedge selling and concerns over how much
higher cattle prices can go amid an abundance of meat protein in the
supply chain,” Roberts said. He urged cattle feeders to be aggressive in
their marketing efforts.
“Cash sellers should definitely push market-ready cattle out of the
door,” Roberts said.
It will be important for cattle feeders to lock in any profits available
going ahead into early 2008 when prices are expected to peak early in
the year. Analysts are predicting that the spring high will come very
early in the first quarter. Red ink has reportedly taken its toll in the
feeding sector this fall, and Iowa State University agricultural
economist Shane Ellis said recently that feeders could expect more of
the same into next year despite high beef prices and a shortage of
available fed cattle.
“We know that cattle feeders have been seeing some red ink so far this
fall and based on the futures market, this is likely to continue until
the second quarter of 2008,” Ellis said. “Producers using a position on
the futures market would have their best chance of locking in a profit
margin from April to June.”
He said their analysis also shows a positive year-over-year trend in the
Iowa fed cattle market in 2008, however, that may not necessarily point
toward better times for cattle feeders after mid-2008.
“As for the breakeven points past next summer, uncertainty in the 2008
corn crop and supply have kept the forecasted breakevens for cattle
finishing well above the range of expected sale values,” Ellis said.
Demand for nearly all classes of cattle at auctions around the country
was good last week, with prices up across the board. As the fall run of
calves dwindles, order buyers are able to find generally fewer
ready-for-rail feeder cattle and are turning to calves, which some say
may be the best value.
Troy Applehans, analyst at Cattle-Fax, explained that even though the
unweaned calves are generally of lesser quality, supply and price gaps
have tightened enough to make them an attractive option.
“I think if you take a look at what the calf market has done, you’d see
that it has declined enough in price so that some people are beginning
to realize that the unweaned calves may be the best buy,” said Applehans.
Applehans said that while the gap between the prices being paid for
calves and bigger feeders has been large in the past, unweaned calves
have nearly caught up to the larger cattle and are now the best bargain.
“What we look at pretty closely a lot of the time, the calf-to-feeder
spread, which recently has gone down to about 105 percent or so, meaning
that for the past month or so, calf prices are only about 5 percent away
from feeders,” explained Applehans. “There’s no doubt that most feed
yards would probably prefer to feed yearlings, but they are in very
short supply, and with the calves being cheap enough to take the risk on
lesser quality cattle, the demand for them is high.”
Applehans also says that the price spread has allowed more people to get
into the calf market than would normally be the case.
“There’s more calf users out there right now that are more willing to
just background the calves, which has kept the demand higher than it
would be otherwise,” said Applehans. “Definitely, folks will have to put
some money into the calves to get them healthy and doing well, but there
is definite value in them. Most guys probably have a situation where
they can feed a high amount of roughage or even just put them in a dry
lot for the winter and will come out better on the calves in the end
than they would on yearlings.”
In Oklahoma City last week at the Oklahoma National Stockyards, there
were a total 7,350 receipts with most cattle going higher. Feeder steers
and heifers were lightly tested, at steady to $1 higher. Steer and
heifer calves were $2-4 higher, with the most advance on the steer
There were 5,100 cattle available for sale last week at the Joplin
Regional Stockyards in Joplin, MO, where compared to the week previous,
steers under 700 lbs. were steady to $2 higher, with weights over 700
lbs. going $2-4 higher. Heifers were steady compared to a light test at
the previous sale. Demand was moderate to good for the moderate supply.
Buyers had the opportunity to purchase several loads of yearling cattle.
Higher fed cattle trade and feeder cattle futures added to the positive
side. Feeder steers weighing 626 lbs. went for an average of $109.71 at
this sale, with heifers weighing 624 lbs. coming in over 10 lower at
At the La Junta Livestock Commission Company in La Junta, CO, last week,
steer and heifer calves under 600 lbs. were $2-4 higher, with weights
over 600 lbs. at $2-3 higher. There were 2,961 head available at this
sale, with active trade and good demand. Previous sale weeks did not see
enough yearling feeder steers and heifers to produce an accurate
comparison. Steer calves weighing between 600-630 lbs. were selling from
$107.50-$113.75, with heifer calves weighing 615-625 lbs. going between
In Torrington, WY, last week, there was a good run of 6,850 head, with
steer calves under 650 lbs. going $1-3 higher compared to the previous
week. Heifer calves under 600 lbs. were $3-6 higher, with instances of
$7-10 higher. There were not enough comparable sales on yearling steers
and heifers for a good price comparison, however, there was a higher
undertone noted. Demand was called good. — WLJ