After very light live cattle trade a week earlier, beef packers cut
plant operating hours again last week to reduce total harvest
significantly in their efforts to boost the sagging cutout values.
However, the move appeared to have little effect and at mid-week, lower
wholesale prices spurred heavy trade, allowing packers to move 482 loads
of Choice and Select fab cuts and 134 loads of trim and grinds out of
cold storage and into the hands of retailers. Most of the decline in
cutout values came on middle meats, with rib roasts and boneless ribeyes
leading the way lower, although there was discounting throughout the
middle meat complex along with some light discount on rounds and
shoulder clods. There has been very little out front beef trade in
recent weeks, which has hurt the beef cutout. Unless contracting picks
up, the trend could continue to hurt cutout prices in the weeks ahead
until tighter fed cattle availability starts to impact the market.
Last Thursday, the Choice cutout stood at $145.34 on the Choice and
$136.83 on Select product. Harvest for the week, despite packer cutbacks
at mid-week stood at 504,000 last Thursday compared to 490,000 head for
the same period a week earlier and 507,000 in 2006. Analysts said it was
likely packers would continue to slow chain speeds late in the week in
an effort to bolster the cutout.
The reduction in kill levels and unsustainable beef cutout kept packers
on the sidelines in the fed cattle battle, with very few animals trading
hands as of last Thursday. As of mid-day last Thursday, feedlot asking
prices stood in the $95 live and $150 dressed range, with packers
bidding $90-91 live and $142-143 dressed. The prior week trade came in a
range of $91-93.50 live and dressed sales traded from $144-146.50.
Analysts last week agreed that fed cattle sales would come in at steady
money in a range of $92-93 live and $142-$144 dressed, although there
was little hope for trade to develop until Friday, perhaps not coming
until after USDA released the Sept. 1 cattle on feed report.
Average pre-report estimates showed analysts were expecting total cattle
on feed numbers to be down 6.5 percent, placements 7.5 percent below
August 2006. and the number of cattle marketed in August up .8 percent
above last year.
“If the report does come out this way, it is again going to be supply
friendly for the fourth quarter of this year, and this is what had guys
covering short December and February positions along with outright net
new February buying going into the close (on the Chicago Mercantile
Exchange or CME),” said Ehedger analyst Troy Vetterkind last Thursday.
“I would really continue to look at lower October live cattle futures as
a buying opportunity.”
He said he expected corn prices on the Chicago Board of Trade to also
move higher which would add pressure to cattle markets although fed
cattle prices are expected to remain strong into the first quarter of
Jim Robb, director of Livestock Marketing Information Center, agreed and
said last week that the corn market bears watching, particularly now
that soybean futures have moved above the $10 level.
“Corn is going to have to buy acreage again next year and in the first
quarter, I think that higher prices are really going to pose a risk and
some of the people planning to sell heavy calves or cattle off wheat
pasture could be faked out this fall,” he said.
Cow beef markets last week continued their seasonal downtrend as more
cattle are shipped to town after the fall sort. The cow beef cutout
value fell nearly $4 from the prior week to reach $109.14 last Thursday,
with the 90 percent lean trading more than $6 lower than the prior week
at $131.08 and the 50 percent trim mostly steady at $49.98.
Western Video Market (WVM) got a good test of the feeder cattle market
last week when they sold 50,000 head on video from the Haythorn Ranch
near Ogallala, NE. WVM co-founder Ellington Peek said that owing to a
large amount of feed in the area, calves sold very well in the Nebraska
“There was so much feed in the Sandhill region there that you wouldn’t
know what to do with it,” Peek said. “Calves sold very well in the
Nebraska, Kansas and Colorado area. There is some drought in the
Nebraska panhandle, but that didn’t seem to hurt local demand too much.”
Peek said that in areas further west, calves were a tough sell.
“Areas in Utah, Nevada, California—some places in eastern Oregon as
well... We’ve got an unbelievable drought in that area and we had a
tougher time selling calves there as a result. We still sold the calves,
but the market simply wasn’t as good as it is on the Plains. I think the
corn report did a good job spurring demand, although calves out west
didn’t see much of a boost because to get them to the Plains to go on
feed would simply cost too much,” said Peek.
The market for yearlings is getting tight due to a limited supply,
according to Peek.
“There are not any yearlings to be had in the west. Anything that was
available for sale has already been sold and is being delivered about
now. We’re really busy shipping cattle right now. I think we had maybe
nine lots of yearlings in the western region sell this last time around;
so the prices are quite high for them because you have to pay for them
if you want the few yearlings that are left,” Peek explained.
Peek also said WVM had a packed house for the first day of the sale when
the calves were shown, but fewer people were on hand the second day to
bid when yearling cattle were auctioned. Good examples of the strong
market were 2,561 head of feeder steers weighing 550-585 which sold for
an average of $129.95 with an October delivery date. One lot of 800 lb.
feeders sold for $116 with a December delivery date attached. A group of
similar 800 weight cattle sold for less in the western region, bringing
a $106.95 average. Heifers did not lag nearly as far behind at the WVM
sale as they have at most auctions during the duration of this market
trend, with most heifer calves hanging within a couple dollars of their
Derrell Peel, marketing specialist with Oklahoma State University, says
that while things remain strong in the feeder cattle market right now,
there could be a little bit of trouble brewing.
“The interesting thing that we’ll see in the markets going into the
spring is competition for acreage between wheat, corn, and soybeans.
There’s almost no way that corn will keep the same acreage it had this
year, and there will have to be a significant run-up in the corn market
in order to buy acreage away from soybeans, which look really attractive
right now,” Peel says.
“The effect this is going to have will be some sort of drop in the
feeder cattle market when we see this price increase in corn. A year ago
in October when we saw corn spike, the feeder market reacted negatively
all winter until it corrected come about February. I think last time, it
reacted mostly out of surprise. This time, we know why the situation
exists and I don’t think the depression should linger for any more than
a month at the most. Long story short, there is definitely a strong
potential for a short-term shake-up in the market, but underneath it all
is still a very tight supply of feeder cattle, which should keep things
from dropping too far or too long,” explained Peel.
Peel also said that wheat production issues in the southern Plains are
keeping some confused about whether there will be wheat available for
“Conditions have been mostly good for wheat. We’ve had good moisture—in
some cases too much moisture—which is helping farmers feel good about
their grazing prospects this winter. The problem is that guys are way
behind on their farming; weed control and planting issues, along with a
severe lack of seed wheat, has put things behind on time. It’s likely
that the wheat grazing season may be shortened, as farmers wait to make
sure they get the wheat out of the ground before they throw any calves
out there,” Peel says.
In Oklahoma City two weeks ago, the cash cattle trade was dampened by
the surprising news that a record corn report had actually caused a
short-term price spike in the CME corn markets. The result was feeder
receipts showing steady demand but slightly lower prices. Auctions
elsewhere around the country were quite limited in the supply of cattle
and did not receive good tests on average, although most markets were
steady and in some cases, lower.
The market for the 10,068 head offering in Oklahoma City last week was
similar, posting prices $1-3 lower on the larger feeder steers and
heifers. Steer calves were steady to $1 lower, and heifer calves dropped
$2-5 lower. All classes of feeders closed at the full decline. Demand at
the Monday and Tuesday auctions was moderate, with the best demand
coming for the steers.
Buyers were selective for kind and condition, with orders for cattle
seeming to run out late in the sale. Weigh ups were reported as mostly
average to full, with a larger number of native calves beginning to show
up as the fall weaning season approaches. Weather in the area was warm
and dry with cool nights, and wheat planting is now finally underway in
most parts of Oklahoma. A large load of 830 lb. steers sold for an
average of $113.68, and a lot of six-weight calves sold for $121.
In Joplin, MO last week, 6,341 head sold, with steer and heifer calves
$1-3 lower, with yearlings steady on moderate supply and demand. As is
typical for this time of the year, fleshy, unworked calves made up most
of the lower market. Six-weight steers sold for $122.75 and 800 lb.
feeders sold at $114.30. Heifers of 600 lbs. brought receipts of
Last week in Torrington, WY, steers were unevenly steady on a very
limited test, with receipts on heifers steady to $1 lower. The 1,442
head total supply showed considerable fill and demand was good. One
larger lot of heavier nine-weight feeder steers brought $113.23.
At the Central Oregon Livestock Auction in Madras last week, 716 head
sold, with 600-700 lb. steers bringing $98-103, and heifers bringing the
same price—steers of heavier 800-900 lb. weights kept up with the
lighter classes, topping out $2 lower at $101 on a light test.
Peek’s comments about the western drought hurting feeder prices were
echoed in Famoso, CA, last week, where a trend similar to that in Oregon
was seen, with 700 lb. feeder steers sold at $106, with one lot of 516
lb. heifers selling for $107.25. Both classes of cattle were very