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Monday, November 5, 2007

Harvest levels remain high

by WLJ



—Late week fed cattle trade expected steady to lower.

Fed cattle trade was once again a late week affair last week, with very little trade occurring in the major cattle feeding areas. Analysts last week said they expected trade steady to weaker than the prior week’s level. The last established market was Oct. 26, with live cattle trading in a range of $92-93.50, with the exception of Iowa/Minnesota, where live sales traded from $90-91. Prior week dressed sales in the northern tier ranged from $139-143. Dressed sales in Kansas sold at $146.50.

The current drive for packers to obtain fed cattle at any cost to keep them away from competitors, despite substantial negative margins, continues to define the fed cattle markets. That heavy slaughter volume was preventing packers from being able to push the cutout values higher last week and Choice boxed beef dropped below the $140 level last week, slipping $1.21 last Thursday to $139.46 at mid-day. Select was also lower, losing 23 cents to trade at $127.92.

There was little reduction in slaughter levels last week, with the week-to-date total through Thursday last week running 6,000 head above the year ago levels at 514,000 head, although packers were able to draw off supplies of contract cattle.

In fact, according to Ehedger.com analyst Troy Vetterkind, one major packer last week was drawing on supplies of Canadian fed cattle to fill supply chains. He said that same packer would be dark Friday and Saturday last week for routine maintenance functions, limiting their harvest for the week.

“The beef market continues to stumble and packers can draw from November contract cattle this week, so all of this combined will keep them less aggressive in the cash market this week, despite smaller showlists in most major feeding areas,” Vetterkind said. “It’s not to say that cattle feeders don’t have any bargaining power this week, as most feed yards remain fairly current and numbers should stay manageable for another couple of weeks.”

He said the focus last week would be on the performance of the new December contract on the Chicago Mercantile Exchange.

“I think there could be some more downside, however, I would really want to see the December contract hold the $94 level in order to keep both cash and futures markets stable,” Vetterkind said.

The cow beef markets last week continued to be a bright spot in the cattle markets. The cow beef cutout last Thursday was trading at $103.64, while the 90 percent lean sold at $122.64 and 50 percent trim, $44.68.

Feeder cattle

Cash prices paid for feeder cattle were mixed this week, with weather and corn prices causing different price trends in different areas. The undertone of the market continues to be one of strong prices feeding off of low supply, as feedlots continue to work hard to fill pens even though the number of steers and heifers available to put on feed is low.
Stephen R. Koontz, professor of Agricultural Marketing at Colorado State University, said that this year marks a place in the marketing cycle where demand for feeder cattle is high, almost no matter what the offering is.

“This is the interesting part of the cycle where the meat side of the industry has to compete with the cow herd side,” says Koontz. “The packers and feed yards are looking pretty hard for cattle to go to slaughter but, unfortunately for them, cow/calf operators are looking for replacements and retained ownership,” Koontz said.

Koontz explained that although margins are tight for feed yards right now, they will continue to try and fill pen space as they look ahead at future markets.

“It’s going to continue to be pretty tough for feed yard managers to look at a budget and say it’s going to work, but with a pen-full mentality, I think most feedlots will try and stay as full as possible and look forward to what might be some pretty attractive fed cattle prices next year,” said Koontz.

According to Koontz, the future continues to look bright for cow/calf operations for as long as the U.S. herd size remains small.

“This is a trend which looks to be pretty favorable for cow/calf and stocker operators while the cow herd stays under the level it needs to be. The people who will get burned are the ones who look at owning the cattle while they’re on feed. They won’t be tough to market, but the price of feed isn’t going to go down considerably for awhile,” Koontz said.

In Oklahoma City, OK, last week, feeder cattle were $1-2 lower following a steady to $2 higher trend on sale morning. Steer calves were $1-2 higher, with heifer calves steady to $2 higher. Demand for feeders was moderated as corn prices continued to climb higher. Demand was good for calves, and especially good for steers.

In Joplin, MO, there were 6,000 head offered for sale last week, with steers and heifers under 600 lbs. steady to $2 lower, with weights over 600 lbs. $1-3 lower. Demand and supply was moderate with the calf trade opening lower, but gaining momentum as the day went along. The yearling trade was lower as buyers are working against a lower fed cattle market and higher corn prices. A noticeably higher percentage of yearlings and wean-vac calves were offered compared to the previous sale. A group of steers weighing an average of 626 lbs. brought $113.71 on this sale day, while heifers weighing 635 lbs. brought $102.17.

At Faith Livestock Commission’s sale in Faith, SD, there were 5,534 head sold last week, with steer calves under 700 lbs. selling steady to $2 lower. Heifer calves under 600 lbs. sold fully $2 lower. A fancy 600 lb. steer was good for $126 at the Monday sale, while a group of fancy 561 lb. heifers were bringing $118.

At last week’s sale at the Stockland Livestock Auction in Davenport, WA, the 1,617 head offered sold steady to $2 higher, yearlings were not well tested. Trade was moderate to active with moderate to good demand, with a group of steer calves weighing an average of 628 lbs. going for $95.84 at this sale.

At Western Stockman’s Market in Famoso, CA, prices were $2 lower on feeder cattle and $5 lower on the stockers out of the 2,229 cattle available at the Monday sale. Good demand was exhibited for the feeders, especially quality 700-800 lb. steers and heifers. — WLJ


 

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