July 23, 2007
Fed cattle trade was expected to move lower in most regions last
week, although with the exception of a few scattered trades in the north
at prices $2 lower than the previous week. Most trade was expected to
wait until the release of last Friday’s cattle on feed and cattle
inventory reports. Prices in the south, in particular, which were still
$4-5 apart last Thursday, appeared to indicate late trade was likely. By
mid-day last Thursday, there had been a few sales reported in Nebraska
at $140, however, most feedlot showlists were still priced at $142-145
live basis, steady with prior week prices.
The action on the Chicago Mercantile Exchange (CME) last week was lower
in the live cattle pit Thursday in anticipation of lower cash trade.
That said, the futures market was still trading at a premium, in some
cases a significant one, to the cash market. Deferred months last week
offered an excellent hedging opportunity for cattle feeders with cattle
for the October through December fed market.
“Current futures prices are even more optimistic than market
fundamentals, scaling into hedging programs or contracting for slaughter
steers and heifers to be sold in October through December looks like
sound business management,” said Jim Robb, director of Livestock
Marketing Information Center.
Last Thursday, the market gave up some of the premium, however, prices
for deferred months were still positive. August dropped 55 cents to
$90.82. October contracts shed 82 points and December fell 62 points to
close at $96.45 and $98.40 respectively. However, weakness was expected
to be short lived ahead of USDA’s release of the two cattle inventory
reports, which were expected to be supportive of the markets. In
particular, the inventory report was expected to show that
herd-building, typical for this point in the cattle cycle, has not
occurred. This year’s calf crop was trimmed by sub-freezing temperatures
during calving season. In addition, heifer retention has been hurt by
drought in the southeast and calf prices which are making it attractive
for producers to sell females into feedlots. The result will likely be a
mid-year inventory report which shows near zero herd growth. Such a
number will support both the live cattle and feeder calf markets which
are already anticipating tight supplies ahead.
On the other hand, beef movement out of packing plant cold storage has
been mediocre for weeks and last week was no exception. Export products
are providing support for the cutout values, while domestic demand lags.
Last Thursday during early trade, the Choice boxed beef price dropped
$1.16, to $142.36, while Select gained 19 cents to trade at $136.74.
Movement was reportedly moderate with 115 loads of Choice cuts, 68 loads
of Select cuts, 30 loads of trim and 39 loads of ground product heading
for retail markets. Slaughter for the week through last Thursday
remained robust with 504,000 head harvested, up from 497,000 head the
previous week and 495,000 during the same period last year, showing that
feedlots are doing a good job of remaining current and perhaps even
pulling cattle forward.
Meanwhile, the cow markets also remain strong. Last Thursday, cow beef
cutout value shed 74 cents to trade at $114.76, while the 90 percent
lean sold at $140.42 and the 50 percent trim remained near steady at
$53.79. Continued strength in the cow beef market has supported the cull
prices being paid in auction markets at the mid-$50 range for much of
the year and prices are expected to remain strong into fall culling as
consumer demand remains high for relatively inexpensive cow beef-derived
products like ground beef.
Heavy feeder and yearling prices were the story of the week last week
following strong video market sales on both Western Video and Superior.
Prices for 900 lb. class cattle in the neighborhood of $1.10 were common
at both sales. Light calves for nearby delivery, however, were
discounted by buyers who aren’t ready to place them in feedlots.
Relatively inexpensive grass is available in many parts of the country
and buyers and sellers, alike, are taking advantage of the resource.
Fall deliveries of calves also sold well with weaned calves in the
500-600 lb. range selling well, particularly at the Superior sale held
in Steamboat Springs, CO. The prices paid for calves bodes well for
producers who have consigned cattle to one of several upcoming video
sales. Futures prices also indicate a solid market for feeder cattle
through the end of the year. Last Thursday’s session on CME ended in
mixed territory, with August and September contracts adding five points
each to close at $115.45 and $116.47 respectively. October feeders were
unchanged at $116.72 and November added 22 points, also ending at
$116.47. Virginia Tech commodity marketing agent Mike Roberts encouraged
feeder cattle buyers to lock in some price protection by hedging feeder
Falling corn prices, which were spurred by improved moisture last week,
continue to be subject to weather issues and will be for the next
several weeks. The downward trend has allowed feeders to lock in
supplies at what look to be good prices. With the wild fluctuations
created by the weather market, it may also be wise to lock in near-term
grain supplies at this time, according to Roberts.
In auction market trade last week, the few reported sales with enough
volume to call a trend were mostly higher as a result of the market
fundamentals, including available grass and growing availability to
stored forage. In El Reno, OK, last week, feeder steers were called
steady to $1 higher, while heifer mates sold steady. Steer and heifer
calves were steady to $2 higher in a light test on moderate to good
In West Plains, MO, last week, steers and heifers sold steady to $2
higher, with yearlings mostly $2 higher. Supply was called moderate and
quality was reportedly down from previous weeks’ sales. Demand was also
good as a result of good grass conditions, considering the time of year.
However, demand was best for yearlings and weaned calves with at least
one round of respiratory vaccinations, a trend which will become
increasingly important as weaning time approaches.
Farther north in Hub City, SD, compared to the prior week’s sale, feeder
steers and heifers sold $2-4 higher on good demand in all classes.
Offerings were made up mostly of load lots of feeders in larger
On the West Coast, in Davenport, WA, no trend was available as a result
of the light run for the week, however, trade was active with good
demand for offered lots. Meanwhile, at Western Stockman’s Market in
Famoso, CA, demand was called excellent for a good run of stocker
cattle, with the best demand on the greener quality kind in the 500-600
lb. range. Feeder demand was called good, with a big string of Mexican
steers sold to out-of-state buyers at excellent prices.