— Calves, yearlings strong on fed profits.
Fed cattle markets were quiet most of last week, feeders were looking to
get $94-95 on the heels of a very active market a week earlier, which
was the result of a combination of seasonal Easter demand and the
Canadian border remaining closed. Packers were offering $88, and they
weren’t getting much bought through Thursday.
Other than formula cattle, just a handful traded in the northern Plains
at $149 dressed, $92 live, $1-2 lower than the prior week. Northern
feeders were again early to trade while southern Plains feeders were
comfortable with current inventory.
The April live cattle contract moved lower during the week. April hit a
high two weeks ago of $91.45 on March 9 and then slipped to $88.47 last
Thursday. Cash markets were starting to feel the pressure. Packers have
been earning a little money since the boxed beef cutout moved higher
based on a little pre Easter panic buying by retailers, the Choice
cutout was $156.55 and Select was at $150.18.
The latest packer margin index shows packers earning $18 per head based
on a average live cattle buy of $92.89 two weeks ago. The boxed beef
market was expected to soften after the Easter holiday buy was complete.
Boxed beef volume was much slower last week
Slaughter levels have remained fairly strong for current times.
Processors moved just over 599,000 head through packing plants. Many
packers were announcing cut backs just after the Montana federal judge
decided to keep the border closed. Either holiday orders are very
strong, the slowdown talk was just talk, or is coming this next week.
Cattle feeders were also seeing some positive margins as many breakevens
on fed cattle are between $88-94. Analysts at HedgersEdge.com think that
the seasonal winter high may have been made two weeks ago at $94.
The lean beef market has been showing significant strength over the past
few weeks. Ninety percent lean was trading at $156.23 last week and the
50 percent trim market was at 76.60. John Nalivka, analyst at Sterling
Marketing, Vale, OR, said that food service was starting to feel the
pinch on hamburger prices, “the ninety-nine cent hamburger may be a
thing of the past,” he said.
Some West Coast markets were reporting slaughter cows in the 60-cent
range reflecting seasonal trends. The cow beef cutout was $121.13 and
the West Coast cow carcass price was up $5 from the prior week to
Wayne Purcell, ag economist at Virgina Tech, said that the court ruling
to block the opening of the Canadian border as scheduled on March 7 has
injected huge uncertainly into the cattle markets. The April live cattle
futures had been as low as $85.35 on March 2 and then surged after the
court action to $92.25 on March 9.
“Current prices are well off those highs, and we have seen a similar
pattern in the June futures. I do not think we are ready to hold a $90
market even with the border still closed and in spite of the limited
trade we saw last week,” Purcell said.
“There continues to be talk of lagging demand in the institutional
market even though the demand index for the fresh beef market shows a
modest increase in the forth quarter compared to the forth quarter of
2003. Boxed beef values for the Choice beef are back above $155 and that
will leave the packers some room to pay batter prices for cattle. It is
a nervous and uncertain market, and I would react by being a seller on
rallies to the recent highs.”
He also suggested producers take profits on long hedges on March feeder
cattle around the $106.40 high, seen back on March 9.
“If you had moved out and placed long hedges in the summer in the August
contract, look at taking profits on those positions around its March 9
high of $106. I do not see a reason across the next several weeks for
these contracts to trade up and hold a new contract high,” Purcell said.
Calves and yearlings were both stronger nationwide last week with the
continued ban on Canadian feeder cattle and good spring grazing
prospects both helping demand for all classes of cattle.
Calves were bringing $2-4 more last week, while heavier, more
feedlot-ready cattle were bringing $3-5 more than the previous week.
Analysts said that many cattle feeders started reporting some profits
two weeks ago when fed cattle started bringing $93-95 and that trend was
expected to continue. Several analysts said cattle feeding profits
ranged between $30-50 per head.
Jim Robb, chief analyst with the Livestock Marketing Information Center
(LMIC) said, the psychology of the industry is bullish all around right
now, and that includes the feeder market,” “Plus, there are fewer cattle
than normal for this time of year, and this is usually a short supply
In addition, feedlots in northern states were reportedly looking for
replacements and were waiting for March 7, which is when Canadian feeder
cattle were expected to be allowed back into the country. When U.S.
District Court Judge Richard Cebull, Billings, MT, granted a temporary
injunction against that, cattle feeders were forced to look at getting
back into the domestic feeder cattle market, sources said.
Feeder cattle prices were also helped by better quality cattle coming
off of southern wheat pasture, particularly Oklahoma and Texas.
According to Bob Miles, USDA auction market reporter from Oklahoma,
feedlots like cattle coming off of wheat pasture because they are a
little bigger framed than cattle coming right off of cows, and they can
pack on the weight at a more rapid pace without as long of a transition
“We have been seeing a lot of wheat cattle since Feb. 21, and that shows
with the increase in price being paid for yearling cattle,” Miles said.
“This will probably last another week and then the wheat cattle market
will subside until the last half of April.”
Producers who graze-out their wheat normally do so until the end of
April or beginning of May.
“Right now, cattle are being pulled off of wheat because, if they wait
any later, any chance of harvesting the crop for grain is jeopardized,”
The first three days of the week saw feeder cattle futures rally
significantly before sliding backward Thursday. For the week, however,
the first few listed contracts were still all up $2-3 compared to the
end of the previous week.
The CME feeder cattle index last Wednesday was at $106.10, compared to
$103.16 the same day the week prior.
On the calf side, backgrounders and stocker operators are both fighting
for available supplies, which are very tight right now. Backgrounders
still have the availability of less expensive corn to feed calves in an
effort to get them ready for a feedlot scenario, while stocker operators
can feed cheaper corn until spring grazing actually kicks up, over the
next month or so.
Commodity analysts said the cash price for feed corn last week was
running between $3.60-4 per cwt prior to delivery.
Forecasts for spring grazing are abnormally bullish across most of the
country, with the primary exceptions being in the Northwest and the
eastern part of the northern and central Plains.
Calf prices were also helped by the profits being reaped by stocker
operators and backgrounders. An informal survey of nine market analysts
and extension economists indicated that those two sectors were showing
anywhere between a $50-90 per head profit on cattle bought this past
fall and sold during the first half of March. — WLJ