November 12, 2007
Fed cattle trade stalled last week as packers and feedlots battled back
and forth to determine who would end up taking bigger losses on this
week’s trade. There was little change in the market picture last week to
alleviate the squeeze on either side of the equation despite packers’
cutback in harvest levels, which served only to prevent boxed beef
prices from falling farther.
As of mid-day last Thursday, packers and feeders were still several
dollars apart and market analysts expected the week’s trade at steady
money. The previous week’s trade in the southern Plains came at
$92-93.50. Dressed sales in Nebraska and Colorado came in a range of
$142-143.50, with live sales from $91-92.50. Live cattle in the western
Corn Belt sold from $89-90, with dressed sales from $140-142.
Heavy carcass weights continue to drag on the market. With weights
averaging 794 lbs. and packers continuing to fight for market share by
keeping slaughter levels higher than is prudent as they fight for market
share, there is a flood of beef on the market at prices buyers have been
unwilling to pay. Packers have had to mark beef lower to prevent a
backlog of product from developing and the result has been a significant
bleed of red ink.
Last week, HedgersEdge.com estimated packer
losses at $67.80 per head on Thursday. If that number is applied to the
entire federally inspected slaughter, that could mean losses for last
Thursday alone would have exceeded $8.5 million. For the week, if kill
levels reached expectations, the losses would total $40-45 million.
Regardless of the red ink, packers continued to push heavy cattle
harvests. The week-to-date total through Thursday last week was
estimated at 511,000 head, down just 3,000 from the previous week, but
still 4,000 head above year-earlier numbers. The high chain-speed did
little to help the boxed beef market. Choice product last Thursday was
at $140.05, up 85 cents from the previous day on demand that was called
fairly good and heavy offerings. Select cuts were also higher, moving up
29 cents to trade at $128.61 mid-day last Thursday.
Oklahoma State University Livestock Marketing Specialist Derrell Peel
noted last week that competing meats and the U.S. economy as a whole are
pounding the beef industry and it doesn’t appear the situation is likely
to change in the near-term, which spells bad news for feedlots and
“Already weak wholesale pork prices, especially hams, coupled with
recent weakness in chicken breast and wing prices, is weighing on boxed
beef prices. Pork production is up 3.1 percent for the year-to-date and
the most recent week was 5.8 percent above last year,” Peel said. “The
pressure is exaggerated even more by unexpectedly strong beef slaughter
rates recently and heavy carcass weights, both of which are pushing up
beef production. It appears that packers, already suffering from lousy
margins, are making matters worse in the short run by jockeying
aggressively for market share.”
Unless things change for the better, either domestically in terms of
beef demand, or abroad, the situation isn’t likely to change soon, Peel
“The result is a vicious squeeze for feedlots and packers with a lot of
pushing and shoving in the fed cattle market each week. There does not
seem to be much relief in sight for packers. Beef demand will continue
to be pressured the rest of the year with ample pork and poultry
production,” he said. “With South Korea back out of the beef market
until 2008, there is little chance that export demand will come to the
rescue. Current boxed beef values do not support fed cattle prices above
the mid $80s, yet packers are paying near $90 for fed cattle at this
Peel said feedlots are equally pinched by the high cost of replacement
feeders and corn prices, which aren’t likely to moderate either.
“Meanwhile, feedlots continue to sell fed cattle that were bought as
very pricey feeders last summer, many of which have breakevens in the
mid $90s, yet they have been able to sell fed cattle around $90 at
best,” he said. “Both packers and feeders are taking punishment in the
market and there seems to be little they can do about it for the time
being except to battle each week to see how the losses get split between
The commodity markets last week were adding to the struggle with big
swings from day-to-day as a result of uncertainty in the broader stock
market and strength in the grains. On the Chicago Mercantile Exchange
last Thursday, live cattle contracts were mostly higher with December
moving up 52 points, closing the session at $95.40. February issues were
up 30 points, ending at $98.35, and April gained 35 points to finish the
day’s trade at $98.82.
Auction markets across the country took in large numbers of calves last
week, while weaned, truly bunk-ready feeder steers and heifers become
harder to find. Large runs of yearlings in the northern states over the
past month have produced a limited offering of preconditioned feeder
cattle, leading to steadily solid demand in most places.
Brian Winter of Winter Livestock Exchange in Dodge City, KS, said that
very few of the feeder cattle at their sale last week were weaned.
“Of the approximately 2,500 head we sold, I would say that less than 400
of those cattle were weaned. It’s been that way for a little while in
this area, where probably 75-80 percent of the calves are coming in
straight off the cow with no weaning,” said Winter. “There’s still good
demand for the calves because the margins are pretty good on them right
now—it’s just at a lower price point than what is being paid for the
yearlings and preconditioned cattle.”
Winter explained that rain has been scarce in his area which, to some
degree, has softened the price and caused a few of the calves to go
“The market has definitely been a little weaker because of moisture
concerns. If we would have had good moisture in this area over the past
couple of months, I think prices would be $10-20 higher,” said Winter.
“Most of the cattle in southwest Kansas are staying in the area and
going to yards because of the lack of grass, but at our Riverton, WY,
barn, we’re seeing a good number of those cattle head to feedlots in
Nebraska, partially due to the same reason.”
Walt Hackney of the Hackney Cattle Company writes that a number of
farmer-feeders in the Midwest have come back to the sale barns and are
keeping demand strong.
“Since feeder cattle have dipped to a lower level, the interest has
returned from Midwest buyers, who were basically sitting on the
sidelines making a decision whether to sell corn to the ethanol plant or
feed cattle,” Hackney said. “Now, with the combination of feeder cattle
cheapening up some and the demand for ethanol corn tempering somewhat,
the feeder buyers are finishing corn harvest and turning their attention
toward filling empty pens.”
Hackney said that although some corn growing areas experienced harvest
challenges which may have decreased yield, the forecast of a record
yield should remain.
“Undoubtedly, with the extra acres planted, corn production will be a
record, with over 13 billion bushels projected, and very possibly, the
cattle feeder will find the procurement of corn for cattle feed to be
easier since part of the bloom may have gone off the ethanol programs,”
Limited wheat pasture continues to affect feeder cattle prices in the
southern Plains states as wheat prices are too high for farmers to risk
losing yield by grazing cattle. This trend continues to show up in
auction markets where rainfall has been good for grass, but without
wheat grazing opportunities, there is not enough acreage to handle the
At the Oklahoma National Stockyards in Oklahoma City last week, there
were 9,665 cattle put up for sale where prices on feeder steers were
found to be steady to $2 lower, with the largest decline found in steers
under 800 lbs. Feeder heifers were steady in a light test. Overall
demand was moderate to good with the best action seen on weights that
will finish in April. Unweaned steer calves were steady, with heifer
calves steady to $2 lower. Demand for calves was moderate to good, with
the best demand on lighter weight calves suitable for the limited early
wheat grazing opportunities. A group of steer calves averaging 624 lbs.
brought $109.33 at the sale, while heifer calves weighing 626 lbs. were
In Joplin, MO, last week, there was moderate demand on the supply of
5,000 head available for sale. Compared to the previous sale, steer and
heifer calves were steady to $2 lower, with yearlings staying steady on
a light test. The bulk of the calf offering was seeing the corral for
the first time, with only a few being vaccinated or weaned. Six
hundred-700 lb. steer calves were good for between $102-112, while
heifer calves of the same weights brought $93.25-100.
Further north in Bassett, NE, last week, there were 4,100 head sold,
with feeder calves trending $1-3 higher compared to the previous sale.
The quality of the cattle was good, with good demand for all classes and
weights. Most consignments had received preconditioning shots and were
fresh off the cow. Steer calves weighing an average of 624 lbs. brought
$119.75 at this sale, with weaned feeder heifers just over 600 lbs.
Torrington Livestock Commission’s sale in Torrington, WY, last week saw
2,800 head sell, with steer calves steady to $3 higher, with some
instances of $4-5 higher. Heifer calves were steady to $2 lower. There
were not enough comparable sales on steers and heifers over 700 lbs. for
a good price comparison, but overall demand was moderate to good. Steer
calves weighing an average of 616 lbs. brought $116.50, with heifer
calves weighing 613 lbs. going for $103.54.
In La Junta, CO, last week, there were 3,909 cattle sold, with steer and
heifer calves steady to $1 higher, except for 550-600 lb. steers which
were $2 lower. In a light test, yearling feeder steers were steady to $1
higher, with yearling feeder heifers being scarce. Six hundred-640 lb.
steer calves brought between $106-110 at this sale, with 605-630 lb.
heifer calves bringing $101.25- 102.75.
There were 2,046 head sold last week in Billings, MT, where, compared to
the previous sale, steer and heifer calves sold with steady to lower
undertones, though there were not enough offerings for a complete
comparison. Demand was moderate, with the overall quality not as
attractive as the week previous. Buyers paid $103.50-107 for steer
calves between 600-700 lbs., and $91.50 for heifer calves weighing 650
At the Toppenish Livestock Auction in Toppenish, WA, last week, there
were 1,970 head for sale with feeder steer and heifer calves steady to
$5 higher, with most consignments being certified as all natural. Trade
was active and there was good demand. Six hundred-700 lb. steer calves
brought $98-105, with heifer calves in the same weight range bringing
At the Western Stockman’s Market in Famoso, CA, last week, prices were
$2 higher on the stockers and steady on the feeder cattle out of the
2,252 head available for sale. A good run made up mostly of stocker and
feeder cattle was seen, with good demand on the feeders, especially
quality steers and heifers between 700-800 lbs. Six hundred-700 lb.
choice steers sold between $95-105 at this sale, with 625-700 lb. choice
heifers bringing $90-97.50.