— Calves, yearlings both slide downward.
Widening negative packer margins associated with significant declines in
boxed beef prices resulted in northern fed cattle trade being $2-5
softer and southern cattle feeders still holding out for at least steady
money through last Thursday. In addition, fed cattle supplies were
starting to build up, particularly in Kansas and Texas, giving packers
the idea they may be able to wait a week more and buy fed cattle
Dressed trade started up in Nebraska on Wednesday at mostly $140, and by
Thursday midday trade had concluded with the last activity at $138-139.
Limited live trade ranged between mostly $86-88, with some isolated
reports of $89. No trade at all was being reported in Kansas or Texas,
and analysts didn’t expect it to happen, if at all, before Friday
Packers were showing negative margins of $20-25 per head last Thursday,
and prospects for even bigger losses appeared imminent as boxed beef
prices continued to trend downward.
Between last Monday and Thursday, Choice boxed beef had lost $5.89 per
cwt and Select declined $6.37. As of noon Thursday Choice beef was at
$146.46, and Select was at $140.93.
Much of that decline was said to be the result of very lackluster U.S.
beef demand during the weekend of Jan. 21-23. That sluggishness was due
to the Noreaster storm that hammered the eastern seaboard and Midwest.
In addition, analysts said that seasonal beef demand has been below
normal and that packers aren’t needing very many cattle at all to keep
up with retail beef movement. According to the analysts at
HedgersEdge.com, packers only need to process 565,000 head of cattle per
week to keep up with current domestic beef demand.
For the week ending Jan. 22, 587,000 head of cattle were processed,
meaning that more beef was produced than could be consumed. That weekly
slaughter level is 60-70,000 head below “normal.” Through Thursday, last
week’s slaughter volume was 471,000, 24,000 more than the same period
the week prior. Several sources said slaughter for the week could end up
over 600,000 head and that could result in packers getting out of the
fed cattle market even more during the first couple weeks of February.
However, retail sources with stores in the eastern third of the U.S.
indicated that consumers will pick up their beef buying pace during the
next couple of weeks. In addition, the New England states and
Pennsylvania could see a run on beef demand as a large majority of
football fans stock up on beef products for their “Super Bowl” parties.
“That could create more empty meat case space that we will need to fill
up during the first half of next month,” one eastern retailer told WLJ.
Live cattle futures spent most of last week narrowly mixed as they were
waiting on cash cattle trade for direction. The February contract stayed
below $90 for the week, closing Thursday at $89.25, up 12 points. April
closed Thursday at $87.65, while June was at $82.30. The fact that cash
had been trading at a slight premium to futures most of the winter was
giving prospective cattle sellers optimism that $90 was attainable.
Analysts said, however, other indicators would say otherwise.
Feeder and stocker cattle prices both trended downward last week with
lighter, more immature calves showing $2-7 declines and heavier grass
cattle and yearlings losing mostly $1-3, compared to two weeks ago.
Yearlings were softer last week due to a lack of support from feeder
cattle futures, the bearish Jan. 1 Cattle-on-Feed Report, and animals
being of poorer quality. In addition, several northern and eastern
auctions cited inclement weather as deterring demand for all types of
“Market adjustments are occurring due to lower feeder cattle futures
beyond the spot month. Quality has been average to attractive, with
feeder cattle in medium flesh. Calves in thin to medium flesh
conditions,” said the market report from Oklahoma National Stockyards,
Oklahoma City. That barn still had over 14,500 head move through their
facility, but prices were called mostly $3-6 softer on all classes of
Officials with Joplin Regional Stockyards, Joplin, MO, reported prices
$2-5 softer and said, “Quality of light calves under 600 pounds not as
attractive (compared to week prior). An unfavorable on-feed report and
lower cash fed cattle and futures markets probably added to the price
March, April and May live cattle futures contracts all closed below the
$100 mark last Wednesday and Thursday. Only two contracts were over $100
last Thursday—January at $104.17 and August at $100.02.
While there are a few cattle feeders showing slight profits on cattle
being marketed right now, most are still in the red $30-50 per head, if
not a little more. That is deterring most feeders from getting in the
feeder cattle market at anywhere near steady prices, analysts said.
Uncertainty surrounding the Canadian border issue is also weighing on
the minds of prospective feeder cattle buyers. If the border reopening
is delayed, several sources expected a rally in feeder calf prices about
March. However, if it isn’t, then a further slide is being projected.
The extent of that possible downtrend was not being forecasted last
While stocker operators weren’t expected to be directly impacted by the
border situation, some market analysts said demand for grass cattle was
being minimized because of stocking rates already being larger than the
previous five years and that most stocker operators were hoping to buy
cheaper calves in the spring.
“If the border does open to Canadian feeder cattle, U.S. feedlots will
probably try to get some of them heavier, more mature cattle rather than
bringing in lighter U.S. calves that will require more time, and
expense, on feed,” a Midwest market analyst told WLJ. “That means more
calves will be available for grass placement, and they may be bought for
less money than right now.”
During Superior Video Auction’s annual “Bellringer” auction held Jan.
19-21, the Friday calf auction appeared to be softer on calves for April
delivery or later. In most instances, those cattle were $7-10 behind
calves sold for immediate or February, early March delivery. Calves for
immediate delivery ranged between $2 softer to $3 stronger, compared to
average prices earlier that same week.
The CME feeder index, for 700- to 850–pound steers, closed Wednesday at
$105.15, compared to $106.36 the previous week. — WLJ