Fed beef trade was slow and cautious last week. Cattle feeders appeared
to think they were in the driver’s seat and were wanting to make packers
pay more for their slaughter needs than the week previous. However, as
of Thursday at noon, packers were not coming to the table with more than
$90 per cwt. In fact, most bids were $88-89 across the country.
For the week, as of press time Thursday, 10-12,000 head of cattle traded
in northern feeding areas at mostly $139 dressed, while Texas sellers
had moved only 2-3,000 head at $88 live.
Most trade during the week leading up to Christmas was at $90 live.
Packers were holding out until the last possible minute to purchase fed
cattle for nearby slaughter needs, sources said. The primary reason for
the stalemate was the fact that packer margins continued to be
Lance Zuhrmann, analyst and consultant with M&Z Livestock Analytics,
said he was convinced that packers may stay out of the cash fed cattle
market until after Jan. 1, particularly if margins didn’t improve
“They are out $50-60 per head right now, and at steady prices for both
fed cattle coming in and boxed beef going out, the chances that profits
will be seen anytime soon are slim and none,” he said. “The longer they
can go without buying cattle and still selling boxed beef, the better
things look for turning around their finances.”
Jason Kraft, CattleHedging.com, Fort Collins, CO, said that packers
weren’t expected to process many cattle last Friday—it being New Year’s
Eve—and that those cattle will be shifted over to meet processing needs
during the first half of the first week of 2005.
David Talbot, cattle consultant with T&Z Ag Commodities, Wichita, KS,
concurred with other sources, and said that below-normal kill days the
previous three weeks have rebuilt packers’ captive supplies.
“It wouldn’t surprise me to see captive cattle supplies be 20-25 percent
above normal for this time of year,” he said. “That means they need
fewer cattle on the cash market, and will set out until either the price
is right or they have reached the end of available supplies. It’s
possible they (packers) could get into the market Monday (Jan. 3) and
have them delivered to plants by Wednesday or Thursday. It’s not without
Packers also appeared optimistic that a significant downturn in live
cattle futures prices last Wednesday would turn the cash market in their
favor. They were waiting for that to happen, as of Thursday midday.
Live cattle futures markets had a rough week with the announcement that
the U.S. would start accepting live Canadian fed and feeder cattle in
March 7. December and February live cattle contracts fell 192 points on
news of the announcement, as did the other listed contracts. Most feeder
cattle contracts were down nearly 300 points through the April contract.
Market analysts said there was no reason for December and February live
cattle futures to plummet like they did. Most sources cited the lack of
communication between USDA and futures traders for the decline in the
two contracts closest in time.
“There had to be an omission of the effective date of implementation for
the rule,” said Jim Robb, analyst with the Livestock Marketing
Information Center, Lakewood, CO. “The earliest Canadian cattle are
going to be allowed to cross the border is March 7, well after both
December and February contracts expire.”
Other sources said the across-the-board futures declines were the result
of the Canadian announcement last Wednesday that another cow may be
infected with BSE.
Boxed beef markets were stronger than the week prior. However, volumes
were much lower than two weeks ago. Over 2,100 loads of fabricated beef
cuts traded on the cash market during the five days leading up to
Christmas eve. Last week’s trade was a bit more tame as the Choice
composite cutout was trading at mostly $141 per cwt and Select was at
$135.09 on moderate volume.
Slaughter for the week was running mostly steady with a week earlier.
Through Thursday 363,000 head had been processed, just 2,000 head behind
the prior week. Cattle slaughter the week of Christmas totaled 497,000
head, 8.4 percent below a year ago. Beef production was down 7.3 percent
year-to-date, which will be where the year will finish up, according to
Overall demand for all classes of feeder and stocker cattle was called
“extremely anemic” last week, resulting in prices between $2-5 below the
week earlier. Additional price pressure is expected in the spring when
Canadian feeder cattle are allowed entry into the U.S.
Most auction barns across the country didn’t hold sales, as they allowed
employees and customers to enjoy the Christmas and New Year’s holiday
season. Most feedlots were also said to be short staffed through the
holiday, and that limited the amount of cattle, if any, allowed to enter
Adding to the lackluster demand was that cattle feeders are still
swimming in red ink. Most breakevens on fed cattle are between $94-96,
$4-6 higher than the most recent cash market price. Stocker operators,
according to Zuhrmann, are also being hurt by red ink, and that is
keeping them out of the market right now.
“Many calf graziers and backgrounders bought lightweight calves at
unheard of prices this summer and early fall,” he said. “The prices for
heavier, more placement ready cattle have deteriorated to levels where
these guys are starting to show negative margins.”
Zuhrmann indicated that several stocker operators are losing $4-7 per
cwt, or $25-45 per head.
The CME feeder cattle index last Wednesday was $104.69, $1.50 below the
previous Wednesday. — WLJ