Despite packers being somewhat short-bought last week, the country trade
got started off early last Wednesday with feedlot managers in Nebraska
taking lower money for more than 55,000 head of fed cattle at a weighted
average price of $147.42 dressed basis, nearly $4 lower than the
previous week’s trade. Live trade was off $2-2.50 at $92-92.50 in
Nebraska. Colorado live sales sold $1.50 to $2.50 lower at $92.50 and
dressed sales sold $3-4 lower from $146-147. Live sales in the western
Corn Belt sold $1-3 lower at $93 and dressed sales sold $2 lower from
Trade in the southern Plains was mostly inactive as of last Thursday,
with feedlots holding onto inventory and asking $96. Analysts expected
trade to wait until Friday before occurring in earnest. Southern sales
the previous week came at $94-95, and most expected last week to trend
$2-3 lower. Given the very current marketing state of most feedlots,
many market analysts were questioning the decision to sell cattle at a
discount last week.
Some of the weakness in the market is a direct result of the slipping
beef cutout values and lackluster fill-in trade following the Memorial
Day holiday weekend. Cutout prices last Thursday were down sharply at
mid-day, despite a shortage of available Choice grading carcasses.
Choice cuts were down $1.67 to $155.55, while Select lost $1.49 to trade
at $146.34 with good movement. Packer margins, estimated by
HedgersEdge.com, were still in the black last week at $14.15 per head
and processing chains were running at full speed to take advantage of
profitability during last week’s holiday shortened schedule. The kill
for the week through last Thursday was estimated at 386,000 head, down
from the prior week’s level of 507,000 head, and 1,000 more than the
same shortened week in 2006.
The calf-feds are now pouring into the market, dropping the number of
cattle available to fed cattle buyers. The percentage of Choice grading
cattle has dropped sharply in recent weeks. According to USDA data for
the week ending May 29, steer carcasses grading Choice were nearly two
percentage points behind last year, while heifers are running a point
behind last year's percentage. As that number drops farther going into
the summer, the Choice/Select spread will continue to increase, favoring
the more sought after Choice product as the summer grilling season gets
One additional area of market support could be found in last week's cull
cow market. The prices paid through this spring for cow beef have been
tremendous and although prices have slipped some from the highs of a few
weeks earlier, producers who have been shipping cows to town are still
receiving good prices throughout most of the country. The cow cutout
value last Thursday was $121.02, well above the same week a year earlier
when it was hovering at $107.41. The 90 percent lean market was at
$152.78, well above the year ago price of $132.65. The 50 percent trim
was also well above year earlier levels at $75.29 compared to $42.54 the
same week in 2006. One of the primary reasons for the climbing cow beef
market is a lack of cull cows coming to market. Despite drought
conditions in the southeast, which is sending feeder cattle to market
early in that region, producers are holding onto culls as herd building
efforts begin. Herd building has been stagnant in the wake of two years
of dry conditions and although market analysts expect the first half of
the year to show flat to slightly positive herd growth, many expect it
to pick up in the second half of 2007.
On the Chicago Mercantile Exchange last Thursday, live cattle contracts
closed higher across the board. June ended up 45 points at $91.15,
August was up 37, closing at $91.47, and October closed 45 higher at
Those prices bode well for feedlots which have been in positive
territory for closeouts for the past three months, according to Dillon
Feuz, agricultural economist at Utah State University.
“By my estimate, the average return to feedlots in Nebraska since March
of this year has been $25 per head. A moderation in feed prices and
fairly strong fed cattle prices has helped feedlots this spring. Lighter
slaughter weights, which has reduced total beef tonnage, has likely kept
the box beef market a little higher and this has helped fed cattle
prices,” Feuz said. “Looking into the future, it would appear that
prices for fed cattle in Nebraska would need to average over $90 per
cwt. for June, July and August for feedlots to be able to show positive
returns throughout that time frame. Current June and August live cattle
futures are at $90.70 and $91.10 per cwt. If basis follows historical
levels, that would imply fed cattle prices for June, July and August of
$92, $90.50 and $90.75 per cwt.”
Feuz said the next three months appear to be breakeven months for
feedlots. The result could be a lack of exuberance when it comes to
contracting for fall feeder cattle.
“While this is preferable to red ink, there probably won’t be enough
black ink for feedlots to get very aggressive with fall feeder cattle
purchases. With uncertain feed prices, I would expect feedlots to be
conservative in buying feeder cattle this fall,” Feuz said.
Already, there are reports that fall contracts are being signed in
cow/calf country, and although prices are difficult to come by, there
are rumors that contract prices are running near last year's levels. The
implication is that those who sign delivery contracts early on could be
seeing the best prices of the year for feeder cattle. Those who hold out
are likely to see pressure and fluctuation from the corn market and an
uncertain summer for cattle feeders facing slim margins.
Meanwhile, in cow/calf country, most auction markets had a limited
offering last week as most calves have moved out to grass and numbers
are not expected to pick up until August. However, demand still remains
high for thin type cattle ready to go to grass. Fleshy new crop cattle
continue to take a hit at most markets.
With the decrease in supply last week, feeder cattle prices remain
strong. Grazing conditions are generally good and many cattle placed on
grass were weighing close to 600 lbs. There's still good demand for
light stocker cattle and that has held prices steady as stocker
operators see good margins for summer grazing. With the continued
moisture throughout a large portion of the western states, producers are
feeling very comfortable with increasing summer stocking rates.
“We’ve had a lot of moisture in this area this spring and we are
certainly thankful for it,” says Tom Johnson, a cattle producer from
northeastern Colorado. “I am planning to increase my stocking rates on a
lot of these pastures this summer. I haven't been able to do that for
awhile but I might as well use it while I've got it.”
Many operators are offering cattle for fall delivery at par with the
board and finding bids a couple dollars under the board delivered to
feed yards on the southern plains.
In Billings, MT, compared to the previous week, feeder cattle offerings
were too limited to allow any price comparisons. Demand was good for
both the stockers and feeders that were offered. Steers averaging 550
lbs. sold for $134 while their heifermates were worth $115.50. One set
of seven weight heifers sold for $104.
East in Jamestown, ND, with over 1,300 head, feeder steers and heifers
sold unevenly steady. Demand was good. Steers that averaged 521 lbs.
sold for $125.78. One lot of seven weights in fleshy condition were only
worth $100 while another lot of steers weighing 782 lbs. sold for
$104.29. Five weight females called for $121. A large lot of heifers
averaging 792 lbs. sold for $94 while their fleshy counterparts were
only worth $90.
Moving south to La Junta, CO, feeder steers and heifers were once again
too lightly tested for a comparison. However, one lot of steers weighing
555 lbs. brought $125 while their female counterparts only averaged
$115. Steers weighing 835 lbs. sold for $104. One lot of six weight
heifers brought $111.
Further south in Clayton, NM, on a light test, feeder steers and heifers
were steady when compared to the previous week. One package of steers
averaging 522 lbs. sold for $132 while the heavier steers weighing 823
lbs. brought $98. Heifers that averaged 535 lbs. sold for $114.50 while
those weighing 690 lbs. were only worth $98.50.
In Salina, KS, steers weighing between 750 and 1,000 lbs. were steady
last week with heifers ranging from 650 to 850 lbs. steady to $1 higher.
Steers that weighed 528 lbs. sold for $131 and seven-and-a-half weights
brought $110. Heifers weighing between 650 and 700 lbs. averaged
$106.41. One lot of 69 females weighing 818 lbs. sold for $102.10.
In Amarillo, TX, feeder steers and heifers over 700 lbs. were steady to
$2 lower with most of the decline on steers over 800 lbs. Steers under
700 lbs. were limited but there was a higher undertone noted. Five
weight steers brought $121 while those ranging between 750 to 800 lbs.
averaged $107.50. Heifers weighing between 500 and 550 lbs. averaged
$115.50 while their fleshy counterparts were only worth $103. One
package of heifers weighing 640 lbs. sold for $92.
Further to the east, in Joplin, MO, with almost 6,000 head, feeder
cattle and calves sold steady to $2 higher with heifer calves as much as
$3 higher. Demand was good for all classes, but best for the numerous
load-lots of yearling feeder steers weighing over 800 lbs. Quality of
the good-sized offering filled the range from plainer quality odd
singles to large strings of top quality consignments. Buyers remained
aggressive with many of the top prices posted late in the afternoon.
Steers weighing between 500 and 550 lbs. called between $122 and $132.
One package of fleshy 870 lb. steers sold for $102.25. Heifers averaging
between 550 and 600 lbs. sold between $104.50 and $113. One load of
females averaging 815 lbs. sold for $98.