— Futures gains cited.
— Calves, feeders steady to firmer.
A strong rally in live-cattle futures last Thursday prompted packers to
come to the trading table with significantly more money than they used
the previous week. That resulted in cash cattle trade being $4-5
As of press time last Thursday, Kansas and Texas cattle feeders had sold
40-45,000 head each within a range of $90-91.50, with the majority
bringing $90.50. Northern trade tallied 50-55,000 head at mostly $90
live, $142-144 dressed.
Early week packer bids were mostly $85 live, $140 dressed and
prospective sellers were asking at least $90 live, $143 dressed. A
fourth straight week of Friday trade was avoided, however, when April
live cattle futures jumped $1.90 Thursday, closing at $88.70. June
followed closely behind, closing at $84.35, up $1.42.
Market analysts said cash cattle prices historically hold a $1.50-2
premium to futures during this time of year and that once “the board”
jumped higher cash cattle prices were destined to follow.
The jump in futures was attributed to packers having to find more
domestic slaughter cattle in the coming weeks after a federal district
judge granted a restraining order against USDA plans to reopen the
border to U.S. live cattle on March 7.
Andy Gottschalk, analyst with HedgersEdge.com, told WLJ the futures jump
was the result of most nearby contracts being oversold on thoughts that
the border would be open to Canadian cattle and demand for U.S. feds
would be depressed. However, with the injunction, Gottschalk, said
packers had to readjust their thinking and work on buying from a
smaller-than-expected pool of slaughter-ready animals.
Some additional market optimism resulted from projections that domestic
beef demand would start to pick up over the next couple of weeks, with
consumers from the eastern half of the country starting to get in the
“grilling” mode. The last few months, demand in the eastern half of the
country has been depressed due to extremely cold, windy and wet weather
curbing much desire to visit restaurants or buy beef from retail
“Seasonally, one would expect improvement in beef demand, particularly
as grilling starts up,” Gottschalk said. “However, we are already seeing
boxed beef resistant at $142, and that doesn’t bode well right now.”
Gottschalk said he thought Choice boxed beef could have tested $144 per
cwt last week, but that didn’t happen.
Choice boxed beef closed Thursday at $141.99, while Select was at
$138.55. Recent boxed beef volume was called moderate with last
Thursday’s load count of 565 being the only 500-plus load day since Feb.
From a beef production standpoint, Gottschalk said the continuation of
the ban against Canadian live cattle would result in about 400 million
pounds fewer in total U.S. beef supplies for the year. Instead of 25.5
billion pounds in U.S. beef being produced, Gottschalk said his revised
figure is for about 25.1 billion pounds in 2005.
“That’s about a $1.50-2 (per cwt) jump in live cattle price for the
year,” he said.
Packers appeared hopeful that the normal spring upswing in beef demand
was about to hit as they picked up their processing chain speeds last
week. Through Thursday, 474,000 head of fed cattle ran through packing
facilities, 23,000 more than the same period in the previous week.
Several sources thought a 600,000-head slaughter week was possible last
week, compared to 576,000- and 574,000-head during the previous two
Slaughter cow and bull prices were also up last week, with most reports
showing gains of $2-3 compared with the previous week.
Cutter cow and cow beef cutouts were all up last week, with the cutter
cow index at $112.28 last Thursday, up $2.50. On the cow beef cutout,
90-percent lean was bringing $144.76, up $4 from the previous Thursday,
and the 50s market was at $71.80, up almost $6.
Retail meat buyers indicated that they are banking on burger demand
picking up over the next few weeks and that they are sending that
message back down the production chain to their cow and lean beef
suppliers. Denver- and Minneapolis-based meat buyers both said last week
that they ordered 30 percent more grinding product for delivery for
March 9 advertising features and that other retailers are giving similar
orders throughout most of the country.
Futures and cash-feeder cattle prices started to show significant gains
last Thursday following the announcement concerning Canadian live cattle
reentry being further delayed.
The March futures contract gained $2.30, to close at $102.62 per cwt on
Thursday. April closed at $101.50, up $2.27; and May was up $1.77,
settling the day at $100.10.
Cash feeder cattle gains were also reported last Thursday. After getting
close to the $100 per cwt mark earlier in the week, last Thursday’s CME
feeder index was back up to $101.66, up 25 points from the previous day.
Market sources said that removing Canadian feeder cattle out of the mix
in the short term helped domestic placement-ready cattle. The average
weekly influx of Canadian feeder cattle entering the U.S. was expected
to be 5-7,000, based on an informal WLJ survey of seven different
analysts. However, with those cattle not coming in now, and supplies
being very tight, analysts said a slight up-tick in feeder cattle could
Gottschalk, however, disagreed somewhat saying that the number of feeder
cattle outside of feedlots right now is unseasonably large, and that
5-7,000 fewer feeder cattle in the mix (weekly) shouldn’t be that big of
Deferred feeder cattle futures contracts were said to be helped by last
week’s USDA projection that almost 82 million acres of corn could be
planted, with 76 million or more acres of that being for grain
production. That acreage figure is 1.1 million acres more than last
year, when a record 11.8 billion bushel harvest was reported.
Gottschalk added that significant gains in feeder cattle prices is
probably unlikely until feeders start showing some significant profit
“At $90 some feeders are still showing negative margins. There are a lot
of break evens in the $92-94 range,” he said. Negative margins could
range mostly between $25-50 per head.
Calf prices remained mostly stronger to $2 higher last week, as stocker
operators continue to see not only good grazing conditions, but also
from cheap supplemental feed, specifically corn and other feed grains.
Weather has also been conducive to bringing in cattle and getting them
through a transition period without too many extra health problems
arising, which means extra expenses are minimized.
Higher-quality heifers continued to bring a $4-7 premium compared to
their poorer-quality counterparts, with a lot of that extra demand being
because of prospects for continued herd expansion in the Southwest and
Midwest, sources said. — WLJ