After the limit-down futures crash that happened the week before, last week looked pretty good.
“As bearish as psychology is, thanks in part to a violent break in CME cattle futures late last week and early this week, the fundamental data still paints a constructive picture,” commented Cassie Fish of the Beef Report optimistically on Thursday, June 6.
“Bears are quick to dismiss anything positive instead focusing on still ample supplies in Q3 and the high probability of a seasonal weakness in cash cattle and boxed beef prices until at least Labor Day. At some point this summer, that bad news will have been fully priced and the market will start to look past it.”
With the futures, if you drop something from a high enough distance, it will bounce. And the feeder futures did bounce pretty well. By close of trade Thursday, the near-term feeder contracts had recovered about half of the value they lost late the week before. The August contract settled at $139.28 (up $6.15) and the September contract gained $5.52 to settle Thursday at $139.60.
The live cattle futures were mixed across the week. The June contract settled Thursday at $107.60, down a net 88 cents for the week, and the August contract gained $1.72 to settle at $104.80.
By the close of trade Thursday, almost 77,500 head of negotiated cash fed cattle had been confirmed sold for the week. The packers took advantage of the crash the week before by buying a sizable volume (almost 30,000 head) early in the week for pointedly lower money. But as the futures bounced, so did the cash prices. By Thursday, prices had risen slightly to $113-115 (average $114.13) live and $182-188 ($184.20) dressed. This was about $1 lower than the prior week’s cash averages.
“Cattle feeders have been aggressive sellers the entire second quarter and packers have answered with larger fed kills than a year ago,” commented Fish.
“This week’s kill is estimated by some in the 660k to 670k range and others in the low 670ks. The largest slaughter so far in 2019 is 673k head the week ended May 4.”
Fish continued, noting that the recently released steer carcass weight data for the week ended May 25 “made a new low for the year at 842 pounds.”
“This is down 7 pounds from last week and down 6 pounds from a year ago, the new low coming later in the period than typically. The last time steer carcasses weighed close to 842 pounds for that week was 2014. No doubt the influence of weather and big fed kills is the explanation for a new low this late. Look for weights to come up slower than normal in June.
Andrew Gottschalk of Hedgers Edge however noted that, seasonally, the creep-up in carcass weights is coming.
“Carcass weights are in the process of posting their seasonal lows, prior to advancing toward their seasonal highs during the fourth quarter. Beef cutout values will resume their downturn as production is ramped up this week.”
The beef cutouts didn’t escape the fall of the week before, and they didn’t bounce back as well as other areas of the market. The Choice cutout slowly bled lower most of the week, losing about a net $1 over the course of the week. On Thursday, it closed at $222.25. The Select cutout lost a net 53 cents over the course of the week with $207.16 after yo-yoing back and forth.
Cash feeder cattle were similarly lower than the week before. Volumes of available feeders were widely mixed, but most prices were lower. The medium and large #1 steers weighing between 700-800 lbs. were more commonly averaging in the $130s and $140s.
California: The Cattlemen’s Livestock Market in Galt sold over double the volume of cattle last week compared to the week before. Prices were down $2-7 on feeder cattle, with larger discounts going to larger cattle. Benchmark yearling steers ranged from $122-140.
Colorado: The Centennial Livestock monthly Holstein feeder cattle sale sold over 1,200 head of feeder Holsteins. Compared to the prior month’s sale, lightweights and 7-weights were sharply lower. Six-weight steers were the exception at up $3-5. Two half loads of 7-weight large 3 Holstein steers ranged from $83-93. Large 3 4-weight calves were $102-113.
Kansas: The Winter Livestock auction of Pratt sold an estimated 3,000 head of feeders last week. Prices paid on steers were up $2-4. Heifers were down $1-2. Calves were too lightly tested for a market trend. Market participation and demand was called very good on the average- to attractive-quality offering. Two healthy-sized lots of benchmark steers sold between $132-148.75.
Missouri: Almost 7,000 head of feeders sold last week at the Joplin Regional Stockyards. This was up about 800 head from the week before. Due to the Memorial Day holiday the preceding week, comparisons on prices were drawn from the sale two weeks prior. Steers under 500 lbs. and heifer calves were called steady to $5 lower, while heavier steer calves were down $6-10. Yearlings were down $4-8. The auction credited the declines in the feeder cattle futures for the price declines. Two lots of #1, 7-weight steers sold between $128-144.
Nebraska: The Huss Livestock Market sold 1,903 head of feeders last week, over 1,000 head fewer than the week before. There were too few comparable sales for a market trend. Two lots of benchmark yearling steers sold between $140-166.
New Mexico: Sales volumes were relatively steady at the Clovis Livestock Auction last week. Unfortunately, prices were not. Steers of all ages were down $6-9 save for 4-weights, which were up $7. Heifers were mostly $2-4 lower except light 3-weights, which were up $6. Only two head of #1, 720-lb. yearling steers sold, bringing $133.25.
Oklahoma: Volumes were steady at the OKC West-El Reno auction. Prices were lower on all classes of feeder cattle however; with steers down $1-4 and heifers down $2-5. Calves were too lightly tested for a market trend. Demand was called moderate to good, especially for the long-weaned calves suitable for grazing. Three lots of #1, 7-weight yearling steers ranged from $136-141.50, while a single small lot of unweaned calves brought $126.
South Dakota: The Hub City Livestock Auction sold half the volume last week that they did the week before, making for few comparable sales. The best test was on steers over 850 lbs., which were steady. On heifers the best test was on heavy 8-weights, which were down $5-6. Demand was described as moderate on a mostly average to attractive offering. Standard benchmark yearling steers sold between $135.50-148.50. An 80-head lot of #1, 761-lb. “natural” yearlings averaged $150.25. — Kerry Halladay, WLJ editor
