Last week’s markets were mixed, ranging from mostly steady in the cash cattle markets, up in the cutouts, and down in the futures.
By the end of Thursday, almost 84,400 head had been confirmed sold in the negotiated cash fed cattle trade, with the bulk of it happening late on Wednesday and Thursday. Prices ranged from $125-130 live (average $126.90) and $203-205 dressed (average $204.30). These averages were up slightly for live prices and down slightly for dressed prices compared to the prices set in the week of Feb. 19-23. This was in keeping with early-week predictions.
The futures market was a mixed bag last week, with gains following losses and vice versa. By Thursday’s settlement however, the near-term contracts were about a net $1.50 lower than on Feb. 23’s close. The April contract settled Thursday at $123.32 and the June contract settled at $115.50.
“The break in the futures market last week kind of solidifies overhead resistance at $127-128 in April live cattle and $118-119 in June live cattle for the time being,” commented Troy Vetterkind of Vetterkind Cattle Brokerage, speaking of the Feb. 19-23 week. “That said, April live cattle and June live cattle will have some near-term support down at $123 and $114 respectively.”
The February contract left the board on Wednesday at $127.50. Based on the cash prices paid out that day for negotiated cash fed cattle, the expiring contract held onto a slight premium to the cash market.
“As February comes to an end this industry is at the cusp of increasing fed cattle supplies,” said Andrew Gottschalk of Hedgers Edge.
“This increase will begin to accelerate during the second half of March and continue to build throughout the summer. The accompanying chart is an updated front-end supply estimate for July 1. Cattle on feed 150+ days project to exceed July marketings by approximately 548,000 head. Needless to say, this will force these cattle to be carried into August at what should be record carcass weights. The projected buildup is second only to the record carried into the summer of 2015. The challenge for producers is to accelerate marketings to minimize the magnitude of this buildup.”
This matter of growing supplies was a focus of concern for market watchers and analysts last week, following the release of the Cattle on Feed report.
“This is the largest February inventory since 2012 when it was 11.8 million head,” noted Cassie Fish of the Beef Report. “The difference of this year to 2012, however, is that there are fewer cattle that have been in inventory for more than 120 days.”
The recent pace of slaughter played into the concerns over coming supplies.
“Slaughter this week is estimated at 592,000,” Gottschalk pointed out, adding with a warning that the week before was 572,000 head. Low marketings and growing carcass weights are “a pattern the fed sector can ill afford to repeat.”
“By mid-March, this industry will begin to build front-end fed cattle supplies at an accelerating rate,” he said. “This buildup will … accelerate into the summer. The supply pattern this year resembles that of 2015, when fed cattle prices faded throughout the year. On a positive note, retail margins are much improved and total beef demand is considerably better than it was in 2015. This should serve to temper (not eliminate) the negative impact from a front-end loaded fed cattle supply this summer.”
Beef prices remain pointed in the upward direction, fueled by both seasonally-impressive consumer demand and packers holding back on production rates, as mentioned.
“Curtailed slaughter levels the last couple of weeks has been supportive to the boxed beef market as packers align production with demand,” commented Vetterkind.
As of Thursday, the Choice cutout stood at $222.30, up a net $4.22 compared to the Feb. 23 close. The Select cutout had gained a net $2.71 with a close of $215.60 the same day.
“Going forward, the month of March is traditionally the weakest demand month of the year for beef,” cautioned Gottschalk. “That said, product support exists at $205 followed by $198-200. Resistance is at $225 for Choice beef.”
On the export demand front, the most recent data (Feb. 16-22) showed a considerable bump in export sales at 21,900 metric tons of beef, up 38 percent from the prior four-week average. Increased buys from Japan, South Korea, Canada, Hong Kong and Mexico were noted.
Feeder cattle
The cash feeder cattle markets bore out mixed sentiments with auctions reporting both gains and losses across feeder classes. Medium and large 1-class (#1) feeder steers weighing between 700-800 lbs. were still bringing averages ranging from the $140s to the $160s. Yearlings were more prevalent than calves.
Colorado: At the Winter Livestock auction of La Junta, sales volumes were relatively steady. Steer prices were steady to down $5 with preference for steers under 700 lbs. Light heifers were steady to up $3 while 6-weights were steady to down $3, and heavier heifers were steady to up $1. Benchmark yearling steers sold between $144-151.50.
Iowa: Volumes were down significantly at the Bloomfield auction last week. Prices were down too; steers and light heifers were down $3-4, while heifers over 600 lbs. were steady. Demand was called good despite the lower prices. Twenty-one head of #1, 720-lb. steer calves averaged $163.66.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City sold 1,000 fewer head of cattle last week than the week before. Heavier steers were steady to $2 lower while heifers were called “firm” to up $3. Calves were said to have a higher undertone. Benchmark steers traded from $145.25-150.
Missouri: Sales volumes were roughly halved at the Joplin Regional Stockyards last week compared to the week before. Steers under 800 lbs. were said to be steady and those over were steady to down $2. Heifers under 700 lbs. were steady to up $3 while heavier heifers were down $2-4. The short sales list was attributed to heavy rains in the area making it hard to move cattle to market. Yearling benchmark steers ranged from $138-153 with averages in the mid- to upper-$140s.
Montana: There were 10 times the volume of cattle sold at the Public Auction Yards last week than the week before, making comparisons impossible. Quality was called plain to average and demand was described as slight on slow market activity in feeders. Most of the offering was slaughter cows or bred cows, for which there was good, strong demand in most classes. Only 17 head of #1, 747-lb. fleshy yearling steers sold, averaging $143.
Nebraska: Prices were steady to lower at the Huss Platte Valley Auction. Feeders under 650 lbs. were uneven. Heavier feeder steers were steady to $3 lower with the exception of 8-weights which were down $6, and heavier heifers were down $2-3. Demand was called good for grass-type steers and replacement quality heifers, but moderate for other classes of cattle. Several groups of #1, 7-weight steers sold, ranging from $148-160, with a group of light “fleshy” yearlings averaging $166.
New Mexico: Volumes were fairly steady at the Clovis Livestock Auction, and prices were mixed, favoring lighter animals. Steers under 700 lbs. were mostly up $6 while heavier steers were down $3. Heifers under 600 lbs. were steady to up $2 while heavier heifers were down $5. Two groups of benchmark yearling steers sold between $140-146.75.
Oklahoma: The OKC West-El Reno auction sold 6,570 head of feeders, down considerably from the prior week’s almost 10,000 head. Feeder steers were called steady, while heifers were up $1-4 on limited offerings. Calves were lightly tested but said to have a higher undertone. Several large groups of benchmark steers sold between $144-157.50, inclusive of calves.
South Dakota: The Hub City Livestock Auction sold almost 1,000 head more cattle last week than it did the week before. Steers over 700 lbs. were called steady to up $2 with instances of up $4 on 8-weights. There was no test on lighter steers. Heifers from 650-850 lbs. sold steady to up $3 while heavier heifers were down $2-4. Moderate to good demand was said to exist for most classes of cattle, with strong demand for the loads of reputation replacement-quality heifers and home-raised, backgrounded feeders. Prices on #1, 7-weight yearlings ranged from $141-165.50.
Texas: The sale volume almost doubled at the Amarillo Livestock Auction last week, providing few comparable sales. Feeders were said to have sold mostly steady on fairly-active trade and good demand. A few small groups of benchmark yearling steers sold between $139-145.
Wyoming: Compared to the sale two weeks prior, last week’s sale at the Torrington Livestock Commission Co. saw mostly higher prices on cattle. Steer calves under 500 lbs. were steady to down $3, but heavier calves saw prices of up $3-8 with instances of up $10. Yearling steers sold $3-5 higher. Heifer calves sold between $3-8 higher, and yearling heifers were called up $4. Benchmark yearling steers sold between $150-168.
“Another monthly USDA Cattle on Feed report, another month of placements exceeding expectations,” commented Fish wistfully at the beginning of last week, predicting the futures markets would interpret the report as bearish. Indeed, the direction last week in the feeder futures was a sideways down.
By settlement on Thursday, the near-term contracts had lost about $1.50 each, with March settling at $145.05 and April settling at $146.75. — Kerry Halladay, WLJ editor
