Fed cattle markets turned softer last week with northern Plains feeders
trading cattle $1-2 lower at $141-143.50 dressed, and limited live trade
at $88. Southern plains feeders were playing a tougher game and holding
for at least $90 as they watched the boxed beef cutout rise for most of
At the end of trade Thursday only 127,000 head traded on a cash basis.
Formula trade was at $145.32 on cattle priced Wednesday.
Slaughter levels remained fairly strong after the prior week’s rally.
For the week ending May 14, 649,000 head were slaughtered to fill Memorial
Day orders. Last week, by Thursday, packers had processed 482,000 head,
up 5,000 from the prior week but down 30,000 head from a year ago. For
the week ending May 7, 656,000 head of cattle went through packers’
In addition, both live finishing and carcass weights are above last year.
That means that even more tonnage is being put on the market, and fewer
cattle may be needed once Memorial Day passes.
The average live weight of cattle processed for the week ending May 14
was 1,219 pounds, 15 pounds heavier than last year. The average carcass
weight was 743 pounds, compared to 734 during the same week last year.
Market analysts continued to call slaughter levels well above consumer
beef demand. Most sources continued to say that 600,000 or fewer head
of processed cattle would meet current beef demand levels.
Packers are seeing some positive margins, earning $26 per head on an average
buy of $92.21 from two weeks ago.
Boxed beef was approximately $3 stronger with Choice trading at $156.88
and select at $140.90 on moderate volume last Wednesday. The Memorial
Day retail supply had been bought up and trade volume had slowed significantly
compared to the prior week’s “fire sale.”
One of the bright spots continued to be the slaughter cow and bull trade,
which is seeing some of the best prices ever. On the cow meat side, the
cow beef cutout was at $124.36, which is near an all time high. The 90-percent
lean market was trading at $159.38 and 50 percent trim was at $85.62.
Analysts said that 150 pounds of fat and trim coming off these fed cattle
is adding $100 per head to them.
The May 1 Cattle-on-Feed report is expected to show feedlot placements
up significantly over a year ago, with analysts estimating 99-115.5 percent
of a year ago. Most of the additional placements are expected to show
up in the 800-pound-and-heavier category. The average analyst guess for
total cattle on feed May 1 is 102 percent of a year ago, with the marketing
number expected to be 96.5 percent, with one less marketing day. The placement
guess is wide open for interpretation. There were a lot of cattle moved
off of wheat and winter grass later than normal.
Heavier feeder cattle brought mostly steady to slightly firmer money,
compared to two weeks ago, according to auction reports from across the
country. However, lighter weight stocker-type cattle were seen trending
$1-5 higher, with heifers showing larger gains than their steer mates.
The fact that most cattle being placed into feedlots currently would be
market ready after the normal summer lull in the fed market had passed
was enough to keep prices mostly steady with the previous week. In addition,
there is still a good chance that both Japan and South Korea will be reopened
to U.S. beef in the last quarter or third of the year, and that would
help fed cattle prices over that period of time.
However, a lack of overall feeding industry profitability was said to
deter interest in buying heavier weight feedlot-ready cattle for much
more than steady money. Most analysts said that northern cattle feeders
could show some breakevens in the mid- to high-$80s. However, several
sources said that southern state breakevens were in the low-$90s for the
In addition corn prices started to spike last week, led by a 10-cent-plus
gain in nearby futures contracts, and that hurt cattle feeders’
ability to ante up more money for cattle procurement. July corn futures
last Thursday got above $2.11 per cwt, compared to sub-$2 levels most
of the previous week. Cash corn trended back above the $2 mark, compared
to the $1.95 level during the previous week.
Analysts said that under normal cattle market circumstances, current corn
prices wouldn’t be much of a concern to cattle feeders, however,
those sources said these aren’t normal circumstances.
“Historically speaking, the feedlot industry is currently paying
at least 12-15, if not 20, percent more for cattle entering feeding facilities,
and isn’t showing much of a profit, if any, for those efforts,”
said Davis Adair, analyst with Chicago-based, ADG Commodities Inc. “In
that situation, any spike in other expenses is more closely scrutinized
and adjustments will be made quicker and more dramatically.”
The CME feeder cattle index, for 700- to 850-pound steers, was $111.98
last Wednesday, about 15 cents higher than the previous Wednesday.
“Grass fever” was the term most used by auction market reporters
last week when reporting the significant upturn in demand for stocker
cattle, particularly calves.
Southwest auction barns reported that the two to three inches of rain
that fell over the second week of May improved pasture and range conditions
immensely and improved the psyches of graziers in the Southwest. In addition,
pasture and range conditions across the northern tier and central Plains
portions of the country continue are called over 60 percent good to excellent
Steer prices were called mostly $1-3 higher last week, while heifers saw
gains as high as $7 more than the previous week. Reports indicated that
the quality of heifers was much better than previous weeks, with a lot
of “replacement types” noted.
Most calves and lighter cattle won’t be ready for market until early
next year, and by then the largest U.S. export markets are almost guaranteed
to be open, which means the prices paid for them at that time should be
much better than the previous few winters, sources said.
From the heifer side, U.S. beef cowherd expansion is expected to be in
full gear next year and several stocker operators are buying higher quality
heifers with that in mind. — WLJ
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