The market is in transition. Packers have gotten a better handle on finished cattle supplies as seasonal demand is changing, seasonal beef prices look to be topping, and cattle futures took a backseat to other commodities.
Last week saw the negotiated cash fed cattle market develop relatively quickly, at relatively relevant volumes, early in the week. “Relative” is the key concept here. Recent weeks have seen next to no trade up until Friday or even late Friday afternoon. In contrast, last week saw thousands of cattle sell each day until almost 17,300 head had been confirmed sold for the week by the afternoon of Thursday, Aug. 16.
Prices on fed cattle fluctuated throughout the week but looking to vindicate analysts’ predictions of a steady-to-lower cash trade compared to the prior week’s averages of $110.29 live and $174.25 dressed.
“Next week’s cash cattle trade is already expected to be weaker than this week,” commented Cassie Fish of the Beef Report late last week.
“One packer has scheduled a cooler cleaning, so the kill will lose some. Packers continue to buy some cattle with time and are already in decent shape for the rest of the month. And if boxes top next week, which would be seasonally likely, then the outlook will certainly be for weaker cash prices.”
However, estimated packer margins reversed course last week and began gaining, suggesting that they will nonetheless have an incentive to kill cattle. On Thursday, the estimated margin was $187/head, up over $60 over the course of the week.
Cutout prices gained about $3-4 over the course of last week, with Choice closing Thursday at $209.10 and Select closing at $201.46
“Price advances in the product market slowed yesterday, as expected,” noted Andrew Gottschalk of Hedgers Edge on Thursday morning. “That trend will follow today, with mixed to weak price levels expected to be reported.”
Live cattle futures were fairly flat last week. Net gains of 7 and 2 cents were seen in the August and October contracts respectively over the week, with settlements of $108.32 and $109.27.
Feeder cattle
In a reversal of the previous week’s dynamic between cash feeders and feeder futures, last week saw discounts in most feeder auctions and growth in the near-term feeder futures.
In the feeder cattle auctions, medium and large #1 steers weighing between 700-800 lbs. saw some declines in average prices, which were mostly in the upper-$140s to mid-$150s.
Kansas: The Winter Livestock Auction sold slightly fewer cattle last week compared to the week before, but prices were called steady to higher. Steers were steady to up $1 while the limited supply of heifers were up $3-4 on 8-weights. Two large lots of benchmark yearling steers averaged $152.43 for the 755-lb. lot and $159.31 for the 730-lb. lot.
Missouri: The Joplin Regional Stockyards sold light steer calves steady to $5 higher, while heavier steer calves and yearlings under 700 lbs. were steady. Heavier yearling steers were down $2-4. Heifers generally mirrored this, except light heifer calves were steady to $2 higher. Two lots of #1, 7-weight yearling steers fetched $148 for the five head of 783-lb. steers, and an average of $154.99 for the 97-head lot of 704-lb. steers.
Nebraska: Steers sold unevenly at the Sheridan Livestock Auction last week compared to the sale two weeks prior. A good crowd was said to be on hand for the yearlings and fall calves. Two lots of benchmark yearling steers ranged from $154.50-160.50.
New Mexico: Sales receipts had almost doubled last week at the Clovis Livestock Auction. Light steers were mostly down $3 while those over 550 lbs. were up $3. The exception was value-added light steers, which were up $7. Heifers reversed the weight and price breakdown seen in steers. Benchmark yearling steers sold between $147-151, while a pair of #1, 7-weight calves brought $138.
Oklahoma: Feeders were down at the Oklahoma National Stockyards last week, with steers seeing $3-5 discounts and heifers seeing $1-6 discounts. Calves of both sexes were down $3-5. Benchmark steers fetched prices between $144.75-154 for yearlings and $135 for calves.
As with the live cattle futures, the near-term feeder futures were mostly steady last week. From the settlement on Friday Aug. 10 to the settlement on Thursday, Aug. 16, the August contract only gained a net 37 cents with $150.27. The September contract similarly only gained a net 60 cents with $150.12.
The relative steady nature of the week-to-week movement belies the intra-week movement which saw triple-digit losses on Monday followed by slow gaining the rest of the week.
“The strong renewed support in lean hog trade, as well as gains in most other commodity markets, has helped to bring about increased overall support through the quietly traded cattle complex,” noted DTN’s Rick Kment late on Thursday afternoon.
“The focus on renewed upcoming talks with China does not have a strong direct connection to the cattle market at this point, but buyers seem to be focusing on the bullish overall tone based on overall association to other commodity markets.” — Kerry Halladay,WLJ editor
