—Packers expected to trim harvest levels soon.
Fed cattle traders were still several dollars apart with asking prices
in the range of $92 live basis and $142-145 dressed basis last Thursday.
Trade was anticipated to occur at prices steady to $1 higher than the
previous week once it got underway. The last confirmed trade was Sept.
22 at $88.50-90 in the southern Plains and in the north, live sales
traded at $87-89. Dressed sales sold at $137-141.
Boxed beef prices, supported by lower packer harvest levels, moved
upward last week. Choice cutout values rose 17 cents on Thursday last
week to close at $141.72. Select cuts were also slightly higher, gaining
15 cents to trade at $132.82. Volume was much improved last week as
wholesale buyers finally found a price point they were satisfied with.
Analysts last week said they anticipated packers would continue to
attempt to move the cutout value higher in an effort to improve margins.
According to HedgersEdge.com, the average packer margin was still
considerably below break-even prices at minus $36 per head last
Erica Rosa, economist at the Livestock Marketing Information Center,
said she expected the market to move higher again last week, but that
packers would cut harvest levels the following week to improve cutout
“The past two weeks, packers have come to the table with more money,
somewhat unexpectedly, but they’re also working on the other end to move
prices higher. I expect we will see cuts in kill-levels over the next
week or two to help boost boxed beef prices,” Rosa said. “The problem
recently has been the boxed prices will move higher one day and drop the
next. Packers haven’t been able to maintain the upward momentum in the
Rosa said, seasonally, she expects the boxed beef market to move higher,
although not to the levels enjoyed during the fourth quarter last year
when it reached record high prices.
“Last year’s prices will be tough to beat and I don’t think we will do
it this year, but I think the mid to high $140s are a reasonable target
for Choice boxed beef during the fourth quarter,” she said.
Factors which will determine the market are still playing out, according
to Rosa. The contract trade in recent weeks has been largely dependent
upon the cash market to determine direction and even a bearish cattle on
feed report, such as the one issued Sept. 22, has done little to move
the market. She said there has probably been some speculation in the
contract trade with regard to trade with South Korea, and some improved
demand on the consumer level as a result of declining energy prices, to
boost the market. Beyond those two factors, there isn’t a clear
direction for the market during the weeks ahead.
“Right now, feedlot break evens are very high based on feeder cattle
prices and right now packers appear to be willing to pay more money for
them, but they have to be able to work toward better margins or they
won’t be able to sustain that practice,” Rosa said.
It looked early last week like packers might decrease harvest levels. On
Monday, packers killed only 116,000 head, however, the remainder of the
week’s harvest rate picked up and Thursday, packers moved 126,000 head
through processing chains. That number was 1,000 lower than the previous
week and 5,000 head more than a year ago. As of Thursday, for the week,
harvest had reached 496,000 head, down from 505,000 the prior week, but
well above a year ago when 476,000 head had been harvested.
The Chicago Mercantile Exchange (CME) provided little market leadership
last week as floor traders awaited cash trade to develop. In the
meantime, contracts drifted sideways last week, with Thursday trade
mixed to mostly lower last week. The nearby October contract was down 32
points during the session, closing at $90.67. December was down 25
points to $89.77 and February was down 12 points to $90.45. Back end
contracts for August 2007 through February 2008 were slightly higher in
last Thursday's trade, with the largest gain coming on the February 2008
contract which closed up 20 points at $89.30.
Feeder cattle last week didn’t receive the normal boost from the fed
cattle market and for the week, most auction markets were mixed to lower
as a result. There is some optimism in the southern Plains for much
improvement in the winter grazing prospects this year. Farmers are in
the fields planting wheat, which is bolstering the stocker prices in
some markets in the south. The rising corn crop estimates and fair
weather as the crop moves closer to harvest has been pushing corn prices
lower as well. According to Rosa, the decline in corn price is also
bolstering the market for feeder calves.
“Corn prices are declining and it’s adding value to what buyers are
willing to pay. Hay is another matter, but rations can be adjusted, so
it’s positive news for the feeder cattle prices,” she said.
In Pleasanton, TX, last week, feeder steers sold steady to firm, with
instances of $2-4 higher. Feeder heifers were called steady with
instances of prices as much as $3 higher than the prior week on active
trade and good demand.
At Oklahoma National Stockyards, in Oklahoma City, OK, compared to the
previous week, feeder cattle were mostly steady in a very light test.
Feeder cattle numbers in the state remain very tight as this summer's
drought, along with a good market, had many cattle moving early. Buyers
last week were selective for kind and condition with some better quality
black-hided feeders going to out of state buyers. Steer and heifer
calves were reportedly steady to $3 lower, with the most loss on heifer
calves. Calf demand was called moderate to good, with best action on
long weaned calves.
In West Plains, MO, compared to the previous week, feeder steers under
750 lbs. sold $4-6 lower, with some cases of $6-8 lower, heifers under
550 lbs. were steady to $2 lower, cattle in the 550-750 lb. range and
heifers were $2-5 lower, steers and heifers over 750 lbs. were called
fully steady on comparable weights. In West Plains, the large supply of
feeders, many of which have health liability concerns, is keeping buyers
on edge with filling orders and as a result, most have chosen to take a
strong stand with what price they put their bidder cards back in their
In the northern tier, fall runs of cattle, what few are left in the
country, anyway, are starting to increase the fall runs although most
market sources are expecting fewer numbers than in prior years as a
result of early weaning and drought-forced marketing. In La Junta, CO,
last week, steer calves under 600 lbs. traded hands $2 lower although
quality was noted to play a role at the sale. Steers over 600 lbs. and
heifers were called steady. The few yearling feeder steers and heifers
available were also trading hands at steady prices.
In Bassett, NE, last week, testable weights on steers trended steady,
with heifers trading fully $2 lower. However, it should be noted that
many heifer consignments were carrying more condition than at the
In Philip, SD, the market was one of the few which moved higher.
According to reports, steer calves under 500 lbs. sold steady to $3
higher, with some instances of as much as $5-10 higher on value added
offerings. Cattle in the 500-600 lb. class moved $2-5 lower. Heifer
calves under 550 lbs. sold $2-5 lower. Yearling steers and heifers were
not well tested. Buyer demand was called good for steer calves with both
spring and fall shots and moderate for heifer calves and cattle lacking
both spring and fall shots.
In Torrington, WY, a good run of feeder steers and heifers sold near to
unevenly steady, with 800 lb. steers steady to $1 lower. Heifers in the
650-700 lb. range were steady to $1 higher. According to market reports,
many of the calves sold were preconditioned and sold in good size
bunches as did many of the yearlings. Demand was good for all classes of
Mike Roberts, commodities marketing agent for Virginia Tech, said
although contract prices for feeder cattle were slightly lower as a
result of live cattle prices last week, there isn't too much reason for
concern. He said losses were limited because there is a shortage of
feeder cattle outside of feedlots which can be placed the remainder of
“Interest for feeders is expected to rebound.
Cattle feeders may want to watch these markets still looking to catch
those up days to sell,” Roberts said.
He also said cattle feeders should keep a sharp eye on the corn market
if they haven’t yet locked in their contracts for winter needs.
“Corn users may still think about pricing a significant portion of corn
supplies at this time as input prices may have established their lows.
Try to catch the low bounce in this choppy corn market to price your
corn if you haven't already,” he said.
On CME last week, feeder cattle contracts were also lower, along with
the cash trade in auction markets. In the Thursday session, the only
contract in the black was the nearby October, which gained 40 points to
close the day at $116.07 last Thursday. October was down 62 points to
$113.22, November and January 2007 contracts were the biggest declines
of the day, with both losing 97 points, closing at $111.52 and $108.97
respectively. — WLJ