Feeder cattle markets rev up
—Video sales, special auction market sales garner good demand, prices.
The fall in corn prices last week served to add significant support to feeder cattle markets, particularly the action in the video auction last week in Reno, NV. Western Video Market’s (WVM) annual Reno sale saw good prices on offered cattle and moderate to good demand from buyers. Although trucking costs hitting $4 and higher per loaded mile had some buyers restrained, action overall was good, particularly for the heavier classes of cattle and calves which were weaned and pre-conditioned. Interestingly, some of the fly-weight calves in the upper-200 to mid-400 lb. calves bound for grass also met with heavy bidding action and some of the best prices of the week.
Nevada calves were in especially high demand at the WVM sale. For example, one 260-head offering of 380 lb. steer calves brought $149.50, while another ranch offering 120 steer calves in the 400 lb. class sold at $147.50. Another Nevada offering of 100 weaned steers with a base weight of 460 lbs. called for $140.50.
Although yearlings and heavy calves were predictably fewer in number, their selling prices were also very strong during the sale, particularly for the Plains state offerings. A Nebraska ranch sold a lot of 212 head with a base weight of 975 lbs. for $113.25, while another Nebraska outfit sold 130 head of 830 lb. steers at $115.75. One Wyoming ranch offering 200 steers with a base weight of 740 lbs. sold their cattle at $116.
The strength of the fed cattle markets over the past several weeks, at a time when the market is traditionally marking its summer lows, has bolstered demand for feeder cattle and the futures contract level has allowed cattle feeders to lock in some profit potential for next year. The result has been a growing interest in the trade to contract calves for fall delivery and rising prices for offerings on the video sales, private treaty, and the seasonally light auction market cattle.
The realization among cattle feeders that there are more tight supplies ahead is also starting to hit the market, bumping prices higher. Heavy cow slaughter, heavy planned marketings of heifers, and low numbers of cattle coming in from Mexico and Canada are all pointing to a shortage of available feeder cattle next year. Already this year, cow slaughter is up more than 8 percent from last year. High cull cow prices as a result of heavy demand for grind product and cow beef and a sharp increase in hay and forage prices is expected by many to continue to keep cow slaughter numbers elevated through this year and into next, translating into a shrinking herd and fewer available calves.
As previously mentioned, auction markets continue to run with seasonally light numbers and in places, markets are taking a summer hiatus until calves start to trickle in from pastures next month. One of the few reporting decent runs of cattle last week was West Plains, MO, which reported a run of 4,200 head of steers and heifers started off steady to $2 higher, but quickly moved $2-5 higher, with some spots $6 higher, once buyers got settled and quality and bunches improved. The exception were the offerings of 500-650 weight steers which sold mostly steady to firm with the previous week on moderate supply and good demand, particularly for the yearling steers which have started to appear in this market.
At Oklahoma City, OK, a run of more than 9,400 head was called mostly steady with the previous week on the feeder steers, with heifers steady to $2 lower. Calves were only lightly tested during the sale with unweaned kinds still selling at a substantial discount to weaned. Demand moderate with some buying interests not very aggressive. Quality was reportedly not as attractive as recent weeks, with limited numbers of cattle in the mix.
At Crockett, TX, last Tuesday, no market comparison was available due to the fact that the sale was just resuming activity after a shut-down, however, prices at the market were good. Steers in the 300-400 lb. class sold in a range of $117-122, while 400-500 lb. steers were in a range of $99-107 with a few reaching $116. Steers in the 600-700 lb. class brought a range of $94-102 while 700-800 lb. offerings brought $93-101.
At the annual Bassett, NE, barbeque auction, good numbers of cattle and buyers combined for an excellent sale, with good quality and condition noted on cattle which consisted entirely of yearlings over 600 lbs. Although no trend was applicable, prices were outstanding across the board. The offering of 314 head of cattle in the 800-845 lb. category sold in a range of $111.24-119.60, while 962 head in the 850-890 lb. class brought a range of $110.60 to $119.10 and 1,612 head of 900-945 lb. steers sold in a range of $109.50-118.80. The heaviest class of cattle in the 950-975 lb. range sold between $109.10 and $118.10.
Fed cattle markets
Feedlot trade started earlier than anyone anticipated last week with all signals pointing lower as the summer slump took hold, at least temporarily. July typically marks the lowest point of the summer market, although it has been unexpectedly strong this year as consumer demand has supported the Choice cutout above the $170 level and kept packer margins up, supporting slaughter volumes.
Last Tuesday, trade broke open in the northern Plains and Corn Belt at prices steady to $1 lower than the prior week at $97 live and $154-155 dressed basis. Trade followed Wednesday in the south mostly steady to slightly lower at $98 in Texas and $97 in Kansas following some $154.50 dressed trade there on Monday. Colorado feedlots traded at mostly $97.50 live and $1.55 dressed.
Despite the decline in the cutout last week, prices remained good although movement out of cold storage was light to moderate at best. Last Thursday, the Choice cutout slipped 54 cents during morning trade, to $170.39, while Select declined 66 cents to reach $161.43. Although prices are down slightly from the highs notched early in July, they remain historically strong and well above last year’s price levels of $142.26 on the Choice and $136.67 on the Select. The result is a nearly $10 increase in fed cattle prices, which stood at $88.88 during the same week in 2007.
As a result of the stronger margins in the fed cattle markets, packers are maintaining incredible margins on their beef operations, estimated at $67.60 per head by HedgersEdge.com last Thursday, down from the highs in excess of $100 and more per head notched earlier in the month. The result has been a willingness among packers to keep chain speeds up as they work to capture as much value from the positive market as they can. Feedlots, on the other hand, have been caught in a tough spot for much of the year. Caught between rising feed and fuel costs and relatively high calf prices, many are reportedly on the market. Some sources note that the number of feedlots on the High Plains being quietly offered for sale could be 60 or higher. Consolidation in the feedlot business could occur rapidly if the market dynamics don’t shift soon. As it is, catle feeding has been a volatile business and heavy losses and increasing risk have dissolved the willingness among producers to retain ownership in cattle, particularly with calf prices remaining high. Unless corn continues its correction, the number of feedlots on the market could continue to rise for some time to come.
The cow beef markets continued to shrink back slightly last week, a correction that began after the first week of July and the strong seasonal demand that accompanies the Fourth of July holiday. Robust cow slaughter numbers have had little impact in pushing prices lower and the cow beef cutout last week stood at $143.46 on Thursday, nearly $30 higher than a year earlier. The 90 percent lean market traded at $183.55, up from $141.26 during the same week in 2007. Meanwhile, the 50 percent trim climbed to $97.33, up more than $44 from the 2007 price of $53.81. — WLJ