Fed cattle trade was very light early last week, with only one reported
purchase in Kansas at $85.50. Analysts were calling for prices to be in
the area of $86, which would be $1-2 lower than the prior week in the
live cattle market and in a range of $135 to $137 in the beef, when
trade finally developed in earnest. The market was called lower last
week despite a widespread snow storm across Colorado southward into the
Texas panhandle, which did little to move cattle early or boost prices.
Much of the downtrend in prices can be attributed to packer losses,
which have been growing. HedgersEdge.com estimated packer margins at
negative $35.85 per head last Thursday. Many analysts were expecting a
bounce in cutout values following the Thanksgiving holiday as consumers
turned to beef products after tiring of turkey. However, weak retail
sales movement last week had caused Choice cutout values to decline to
$140.24 on Thursday, while Select traded at $126.74. The slide in packer
margins caused some plants to cut kill levels last week. Thursday’s
harvest volume was estimated at 127,000 head. There was no kill the
prior Thursday because of the holiday, however, the harvest was 1,000
more than in the same day in 2005. There were reports that packer
cutbacks would continue through the week in an effort to regain lost
margins, however, the jump in harvest from Wednesday’s tally of 119,000
head indicated the cutbacks were short-lived. For the week through last
Thursday, harvest totaled 498,000 head, up from 385,000 for the same
period during the prior holiday-shortened week.
Some futures traders, based on contract trade on the Chicago Mercantile
Exchange (CME), don’t expect a market recovery any time soon. Last week,
a few bearish traders adjusted their positions on the live cattle
market, calling for trade in the $80-81 range in the near-term.
“I think the Chicago traders are looking back at last year’s unraveling
of the market and expecting the same this year,” said Jim Robb, director
of the Livestock Marketing Information Center. “If they think the same
thing is going to happen this year, I think they’re nuts.”
Robb said he expects the market to trade mostly sideways for the rest of
2006 and into the first quarter of 2007.
“Without severe weather, we aren’t going back to $90 feds, but I think
trade will be mostly steady looking ahead. A lot of things would have to
go wrong in the market for cattle to trade down to the $80-81 level,”
Robb said. “However, sometimes the more bearish the futures market gets,
the better it is for the cash fed cattle market.”
On the CME, live cattle contracts last Thursday were mostly higher. The
December contract gained 50 points to close at $85.70 and February was
up 70, to $89.10. April contracts moved 67 points higher to end the
day’s session at $90.30. Deferred contracts moved slightly higher,
making up for sharp losses the prior day when up front contracts dropped
more than $1.
Record high carcass weights have begun to decline seasonally and the
cold weather last week was expected to hasten the drop, which could also
help to boost prices as a result of the production decline. Robb said
the cold front, which at mid-week stretched from Alberta, Canada, well
south into Texas, would prevent any excess weight being put on cattle
and could help movement out of feedlots, both of which could create
positive effects for the market.
The beef market has also been helped by a decline in the volume of beef
imported from other beef producing nations. According to USDA’s Foreign
Agriculture Service (FAS), the value of cattle and calf imports is
estimated at $1.6 billion, up from the August number of $1.3 billion,
due to higher U.S. feeder cattle prices and increased imports from
Canada and Mexico. On the meat side however, imports of fresh beef and
veal during 2007 are forecast at 1.1 million metric tons, unchanged from
the August estimate. The value of those imports is predicted to total
$3.6 billion, up from the August forecast of $3.3 billion. During the
current year, according to FAS statistics, imports of beef from Canada
equaled 242,856 metric tons, down 20.6 percent from a year ago, while
imports of beef from Australia totaled 241,129 metric tons, 9.1 percent
lower than a year ago mostly because Australia is focusing primarily on
Asian markets where the U.S. has lost market share. Beef imports from
New Zealand totaled 162,629 metric tons, down 5.3 percent from last
year. Beef imports from Japan totaled nearly 27.0 metric tons.
Through Nov. 13, the U.S. imported 14,725 metric tons of beef from
Uruguay which was 8.2 percent lower than last year. Uruguay continues to
supply beef to those markets lost by Brazil and Argentina which were hit
with foot-and-mouth outbreaks.
The cash feeder cattle markets were slightly higher last week and it
appeared that despite rising corn prices, much of the news had been
priced into the market. December new crop corn futures on the Chicago
Board of Trade settled last Thursday at $3.77 per bushel, while March
contracts moved five cents higher to $3.90. Meanwhile, cash prices in
Kansas City, MO, moved higher to trade in a range of $3.67-3.69 per
bushel. The CME cash feeder cattle index was steady to a few cents lower
at $100.04 despite the rise in corn prices.
One unexpected side effect of the sharp decline in the feeder cattle
market this fall has been the canceling of some cattle sold in late
summer and fall. There have been some reports of canceled deliveries of
forward contracted cattle. Although the reports are scattered, it seems
that the high prices paid earlier in the year, before prices began the
slide, are too much for some buyers to stomach.
Along the West Coast, feeder cattle prices continue to soften slightly
as a result of high freight costs and the rise in feed prices that have
affected everyone this year. In Vale, OR, last week, demand was slightly
better than during the prior week, particularly for cattle in the
300-500 lb. range. Prices on the heavier calves and yearlings on offer
were under pressure as a result of sluggish demand on cattle that will
finish earlier. Steers in the 400-500 lb. class sold in a range of
$111-124, while their heifer mates brought $99-110. Steers in the
500-600 lb. range sold from $96-108 while the same weight heifers
brought $87-96. Farther to the north, despite a string of bad weather,
in Davenport, WA, feeder cattle traded $4 higher on active trade with
In the northern Plains, where the fall runs are mostly finished and cold
weather prevailed last week, trends were difficult to determine as a
result of light offerings and a lack of sales the prior week. However,
in areas where enough cattle were offered to call a trend, it was mostly
lower. For example, in Mandan, ND, feeder steers over 500 lbs. were $2-4
lower and feeder heifers over 500 lbs. were steady to $1 higher. Feeder
steers and heifers under 500 lbs. were not well tested Buyer demand was
reportedly good on all classes of cattle.
In Sioux Falls, SD, compared to the sale two weeks prior, feeder steers
were mostly steady, except 500-550 lb. cattle which were $3 lower.
Feeder heifers under 950 lbs. sold steady to $2 higher on a light test.
There was reportedly good sale attendance with good buyer demand on all
In Ericson, NE, last week, feeder calves under 600 lbs. trended $3-5
higher, with weights over 600 lbs. trading steady to $3 higher. No trend
was called on a short string of yearlings, but very good demand was
noted. Cattle quality was called good, with very good buyer demand.
In Joplin, MO, steers under 700 lbs. were called steady to $3 lower,
while those over 700 lbs. were steady to $2 higher compared to a light
test the previous week. Heifers under 600 lbs. were $3-5 lower and those
over 600 lbs. were steady on light to moderate demand for calves on
offer and moderate to good demand for yearlings.
In Oklahoma City, OK, compared to the prior week, feeder cattle and
calves were called firm to $2 higher, except for steer calves in the
500-700 lb. class which were $1-2 lower. Demand was called good for all
classes except moderate for heavy, fleshy calves and quality was
reported to be mostly average.
At the auction market in Abilene, TX, last week, feeder steers under 500
lbs. were $1-2 higher and those over 500 lbs. were called $2-4 lower.
Feeder heifers under 500 lbs. sold steady to $3 higher, while those over
500 lbs. were $1-2 higher.