—Fed cattle prices rise ahead of holiday.
Cash fed cattle trade last week was slow to start, with feedlots and
packers working hard to outlast one another before coming to the table.
As of last Thursday, analysts were still expecting trade at prices $1
higher than the prior week at $93-94 live and $146-148 dressed. However,
as of mid-day last Thursday, feedlots were still passing on packer bids
and were as much as $2-3 apart. A rising cutout and the expectation that
next week’s holiday-shortened schedule ahead would add more strength to
the boxed beef market was adding to feeder’s optimism late last week.
Slaughter volume through last Thursday was estimated at 508,000 head, up
8,000 from the same period a week earlier, but below the 514,000 head
tally for the same period a year earlier.
Despite strong prices projected through the fourth quarter, there are a
number of questions surrounding how packers are going to be able to
continue to pay higher money for fed cattle without being able to boost
the Choice cutout, which has spent most of the summer in the low $140s.
“We are still facing a somewhat tight supply of fed cattle through the
rest of this year, but packer margins are pretty narrow right now,” said
Livestock Marketing Information Center Analyst Erica Rosa. “Our
projections show fed prices for the fourth quarter in the mid- to
high-$90s, but that’s strictly a result of the supply side. The demand
side is pretty uncertain right now. With the uncertainty in the U.S.
economy and lower priced competing proteins, you have to wonder whether
beef prices are getting to the point where we are priced out of the
There is a tight supply of fed cattle right now, although some analysts
have started to speculate that the supply is not as tight as previously
thought. With weights beginning to increase seasonally and a futures
premium for October fed cattle, feedlots may be slowing marketings,
easing the supply pinch somewhat to the packer’s advantage.
Rosa said there are a lot of unknowns in the market right now given the
continued good grazing conditions in much of the country, increased
heifer retention going forward this year, corn prices, the macroeconomic
situation in the U.S., and international trade.
“We have been receiving reports of producers holding heifers back in the
southern Plains,” she said, adding that heifer retention this year is
expected to be strong in many states where grazing conditions remain
quite good as a result of late season precipitation.
In terms of international trade, Canadian packers, which have been
struggling since the border reopened allowing shipments of live cattle
to the U.S., continue to close their doors. That has led to an increase
in the number of cattle being shipped to the U.S. for slaughter and an
increase in the amount of beef being exported to Canada, Rosa pointed
out. Exports to Mexico and other countries are also on the rise, which
is adding some support to cutout values. “But if you look at the middle
meats, they aren’t able to sustain the cutout,” she said. Middle meats,
which are typically consumed domestically, are a key to boosting cutout
values higher, however, U.S. consumers are passing them up in favor of
lower priced cuts, ground product and competing proteins.
“If you look at the restaurant trade, you’ll see an increase in the use
of some value cuts like the Flat Iron, mock tenders, skirt steak and
flank steak. Restaurants are responding to consumers who are facing an
uncertain U.S. economic picture,” Rosa said. “If you look at retail
features, you’ll see it there too. I recently saw an ad featuring
bratwurst, sausage and ground beef. There were no middle meats on the
front page at all.”
That lack of demand from the retail and consumer levels translates to a
cutout which, last week, was trading higher at $147.01 on the Choice
product and $140.49 on Select cuts, above year-ago levels of $145.28 on
the Choice and $135.39 on the Select. However, last Thursday’s movement
was light to moderate with only 130 loads of fabricated product and 54
loads of trim and grind selling ahead of one of the biggest grilling
holidays of the year. Most retailers had already secured their meat
needs for the weekend, however, it appeared that none were willing to
bet on the need for quick fill-in following the holiday.
The cow beef market continues to be the big winner in the cattle markets
as a result of consumer preference for lower priced cuts of beef and a
drop in cow slaughter compared to 2006 levels. Cow beef cutout values
last week were $13 higher than year-ago prices at $118.75, while the 50
percent lean traded at $48.44, $7 higher than the same day in 2006 and
the 90 percent lean moved higher to $147.94, compared to $130.56 last
The opening of the Canadian border to animals born after March 1, 1999,
could certainly impact that market if, and when, USDA makes that move.
Some speculate it could come as early as October, however, most believe
November or December are more likely.
According to Chicago Mercantile Exchange
Analysts Len Steiner and Steve Meyer, there are perhaps as many as
600,000 head of cull cows in Canada that would meet the age criteria,
although it is unlikely that all of them have the proper documentation
required for export to the U.S. They also noted that it was unlikely
that there would be a huge pulse of cattle immediately after the border
opened, although they did note that possibility exists. In comments last
week, the two analysts pointed out that many of these cows are now bred
and will likely be retained in their Canadian herds until after calving.
Although there could be an initial pulse of cull cows coming in from
Canada, the market should remain strong well into the first quarter of
next year as U.S. herd building gets underway and cow slaughter drops.
That scenario could make feeding culls this winter an attractive
opportunity for some producers.
Feeder cattle remained firm again this week, with most regions of the
country having adequate moisture. Richard Stober of Superior Livestock
Auction talked about their video auction of Aug. 21-24.
“For these calves and yearlings, it seems like the market gets better
just about every time we have a sale,” he explained. “Most areas are
getting adequate moisture, but there are definitely some dry pockets
scattered about the west and the Plains,” said Stober.
Earlier in the summer, a number of cattle were being sold quickly in
large, drought-stricken areas of the Deep South, but Stober said that
isn’t the case any longer.
“There aren’t really any more fire-sale cattle coming from that area.
The south, for the most part, is still pretty dry, but in places like
Florida, they’ve been getting enough moisture to go ahead and carry some
of these calves out to their normal delivery dates,” Stober said.
Stober said demand was very good, with a large number of buyers looking
“There were definitely a lot of yearlings selling quite well on good
demand and most of them were going to get delivered in the end of
September to first part of October. The lighter calves, in most cases,
were going to be delivered later in October and November, as there were
a fair number of buyers looking for calves to put out on wheat,” Stober
The Superior auction had a total offering of 161,000 head, 42 percent of
which were feeders over 600 lbs., and 64 percent of the feeder supply
being steers. Compared to the last sale, feeder steers and heifers were
firm to $3 higher, with calves in some places being $4 higher. Moisture
in the southern Plains continued to spur demand for lightweight calves
for winter grazing. Areas further west traded as much as $6 higher on
most classes of cattle, but the sale’s exception was for lightweight
calves in the northern areas, where most calves sold $3 lower.
Feeders in the north-central region sold at $123.37 on a 628 lb.
average, compared to $119.63 on a 621 lb. average in the western
regions. Some heavier 700-800 lb. steers sold for an average of $111.14
in the far western region where prices remain good, but buyers are
cautious of drought conditions in the Pacific states.
Derrell Peel, Extension Livestock Marketing Specialist for Oklahoma
State University, says there is still good reason for prices to remain
steady to higher for most feeder cattle.
“The economics from a stocker perspective still look pretty attractive,”
says Peel. “There has been tons of moisture in Oklahoma and parts of
Texas recently, and especially in Oklahoma, there look to be some good
opportunities for wheat pasture this fall, especially compared to last
year,” Peel explains.
“There are a lot of guys with plenty of grass, so that should keep
demand for winter grazing cattle strong no matter what, because even
though prospects look good, production issues could keep operators
waiting until later to decide what to do with their wheat,” says Peel.
Peel explained that a horrible wheat crop last year in many
winter-grazing areas of Oklahoma and parts of Texas will keep farmers
leery of putting too much on their plates this fall.
“The main reason stocking could be conservative in this area is because
producers will be more concerned with getting a good wheat crop in than
they will be about putting calves out to graze,” explained Peel. “I
think most guys will still graze if they are able to get the wheat
planted in time, but they may reduce stocking rates, or take heavier
cattle and put them out later. Most people will just wait a little
longer to make sure they’ve got good wheat before they throw a bunch of
calves out there,” Peel said.
In the cash markets, there was a total run of 4,020 head last week in El
Reno, OK, where feeder steers and heifers were mostly steady to firm
except for heifers over 700 lbs. Feeders in some instances were $2
higher, and 600-750 lb. thin, grazing-type steers were weak compared to
the previous sale’s extremely high market. Steer and heifer calves sold
steady on a light test. A large portion of the yearling offering was in
thin condition due to extremely wet pastures, which are slowly drying
out after significant rains in eastern Oklahoma.
Further north at the Bassett, NE, sale, 2,070 head were sold last week
and prices were fully steady on all classes of feeder cattle. A few
short strings of fall calves were mixed in with the yearlings, which
dominated the offerings. Nearly all cattle were over 600 lbs., and 52
percent of the feeders offered were steers. Eight weight feeders sold
for averages between $117.58 and $119.84, with average prices for 900
lb. yearlings falling in at $115.50.
Last Monday at the Stockland Livestock Auction, in Davenport, WA, 1,543
head sold, but not enough feeder cattle for accurate trend comparisons.
Feeder cattle trade was moderate to active and demand was moderate.
Feeders made up 63 percent of the run, and the supply included a 50/50
steer/heifer split. Nearly 52 percent of the run weighed over 600 lbs.
Eight-weight steers sold in the $101-102 range, but lighter steers and
heifers of 600 lbs. were only a $2-3 higher in most cases.
Receipts totaled 1,476 last week in Clovis, NM, and compared to the last
sale, feeder steers under 500 lbs. were $8-12 higher and steers over 500
lbs. were steady to $3 higher. Heifers sold mostly steady to $1-3
higher. Trade was active and demand good. Feeder cattle accounted for 75
percent, and steers made up approximately 62 percent of the run. Steers
and heifers over 600 lbs. totaled 64 percent. — WLJ