Christmas came early to cattle feeders last week as prices for fed cattle rose again.
The negotiated cash fed cattle trade got underway in a big way last Wednesday, with almost 48,000 head having been confirmed sold by the USDA’s 2 p.m. closing report. Cattle traded at $120-121 live and $189-191 dressed. By Thursday, over 90,000 head of cattle had been confirmed sold at $119-122 live and $190-193 dressed. These prices were up $2-3 compared to the prior week’s prices and well in line with analysts’ expectations.
“Packers needing inventory were forced to pay steady/higher money for cattle this week despite next week being a short kill week,” commented Troy Vetterkind of Vetterkind Cattle Brokerage.
“[New Year’s week] will be a short kill week too, but they could be lining up numbers to kill coming back after New Year’s as slaughters will get ramped back up to 630,000-640,000 head per week.”
Last week’s production rate was expected to be 620,000 head, though packer margins being in the red now might have caused a few packers to cut production on Saturday.
Despite the strength in the negotiated cash fed market, the futures were struggling, trading at a discount to cash. Over the course of last week, near-term live cattle futures were mixed. The December contract gained a net 72 cents to settle Thursday at $119.62. The February contract on the other hand lost a net $1.35 over the week to settle at $119.67.
Vetterkind opined that the losses were “due another round of spec fund liquidation and positioning ahead of what’s perceived to be a bearish Cattle on Feed report.”
As of print, the Cattle on Feed report had not been released. Expectations were for on-feed populations to be up 7 percent compared to the same time last year, placements up 5 percent, and marketings up 3 percent.
The Choice cutout also fell last week. By close of trade on Thursday, the Choice cutout had dipped to $198.12, the first time since mid-October it has fallen below $200. The Select cutout meanwhile gained roughly $3.50 over the course of the week to close Thursday at $186.87.
“Product values have finally flushed, which should set the stage for a recovery into mid-January,” noted Andrew Gottschalk of Hedgers Edge last Thursday. “Our price recovery objective remains $210 basis the Choice cutout.”
Beef demand and retail features are proving joyful, however.
“In Denver, Safeway and King Soopers led with boneless Choice ribeye at $4.77 and $4.47, respectively. One should not underestimate the positive impact of the tax reduction bill on consumer demand for beef. Beef will benefit the most, as individuals move up the protein ladder.”
Feeder cattle
Almost all the surveyed auctions saw declining offerings ahead of the Christmas holiday week. Many also included notices that this was the last sale of the year. Medium and large 1-class (#1) steers weighing between 700-800 lbs. on offer were mostly steers and the prices were mixed.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City saw its sale offering halved last week compared to the week before. There were too few feeders to give much of a market test, and trade was called slow on light demand. Benchmark steers sold between $141 for fleshy yearlings to $153.47 for standard yearlings.
Missouri: More cattle sold at the Joplin Regional Stockyards last week. Steer calves were called steady to down $5, yearling steers steady to down $3, heifer calves steady to up $3, and yearling heifers steady. Two large lots of #1, 7-weight yearling steers averaged $152.58 for the 713-lb. group, and $150.78 for the 768-lb. group.
Nebraska: Just under 5,000 head sold last week at the Huss Platte Valley Auction. Feeders were called unevenly steady on moderate to good demand. Several large groups of benchmark steers sold between $152-168.75, with calves setting the base.
New Mexico: Light steer calves were called $6 higher at the Clovis Livestock Auction, while those over 500 lbs. were sold anywhere from up $1 to down $1. Heifers were called mostly $2-5 lower. A load of yearling benchmark steers sold at $140.88, and a group of 36 head of value-added heavy calves sold at $127.50.
Oklahoma: Feeders were an uneven steady at the Oklahoma National Stockyards with heifer calves seeing the largest declines of $3. Demand was called moderate in general, but good for heavier weaned steer calves. Fleshy yearling steers in the #1, 7-weight category set the base price at $141-145, while standard yearlings ranged from $146-159 and averaged solidly in the $149-151 area.
South Dakota: The Hub City Livestock Auction was also one of the odd sales that saw more cattle sell last week in its special calf offering than the week before. Steer calves were mostly down $4-5, though calves over 600 lbs. were unevenly steady. Heifer calves under 550 lbs. were up $4, between 550-600 lbs. they were called steady, and over 600 lbs. were down $3-5. About three-quarters of the offering was said to be bawlers with some preconditioning shots. Prices ranged from $145.50 for fleshy benchmark steer calves to $173.50 for some light ones.
Wyoming: At the Riverton Livestock Auction’s sale last week, feeder calves were the only feeders on offer. They were called unevenly steady with a higher tone noted on 550-650 lb. steers. There were no #1, 7-weight steers reported, but a group of 97 head of 613-lb. calves averaged $166.14.
Feeder futures lost about a net $5 over the course of last week. The January contract settled last Thursday at $142.92 and the March contract settled at $140.40.
“I would think we have a large portion of this report priced in, especially in the feeders,” commented Vetterkind about the Cattle on Feed report, predicting a $146-148 overhead resistance level in near-term contracts.
“February and April live cattle probably have another $2-3 down but feeder cattle should try to stabilize down around this $140 level.” — Kerry Halladay, WLJ editor
