There was good news and bad news last week’s markets.
First, the good news: The negotiated cash fed cattle markets held the $126 line.
By close of trade on March 8, the bulk of almost 99,000 head of cattle traded in the cash markets at $125.50-129.50 live (average $126.77) and $204-205 dressed (average $204.03). These averages are higher than the prior week’s averages of $126.14 live and $203.80 dressed. But the biggest issue was the live prices.
“Cash support at $126 is critical,” said Andrew Gottschalk of Hedgers Edge before the flood of cash trade happened. “A violation of cash support at $126 will buy this industry a ticket to $120-122, the next level of cash support. Resistance is $130.”
Now the bad news: Futures did not hold their levels or respond as they needed to.
“Given the market’s ‘oversold’ condition, futures need to respond positively and soon,” Gottschalk continued on Thursday morning. “‘Oversold’ markets that do not respond positively are emitting a negative market signal.”
Also on Thursday morning, Troy Vetterkind of Vetterkind Cattle Brokerage described the futures as consolidating and preparing for “their next big move.” What move that might be, he wasn’t sure on Thursday morning.
“The market has clearly carved out near term support and resistance levels this week and a breach of these levels either way will dictate the next move. Resistance levels stand strong above the market at $124 in April live and $116 in June live with support found at $122 in April and $114 in June. Whether we breakout to the topside or the bottom side of these ranges is yet to be seen but suffice it to say I believe we’ll get at least a $2-3 move in the direction of the breakout.”
By Thursday’s settlement, the direction of this forecast breakout seemed clear; decidedly down.
The near-term live cattle contracts lost over $1 on Thursday’s trade alone and were down over $2 from the intra-week high posted on Monday. April settled Thursday at $121.77 and June settled at $113.27.
“It still looks as though these contracts are going to test their respective 200-day moving averages at $120 and $113,” commented Vetterkind. “It definitely feels like the cattle futures complex is going through a round of spec fund liquidation, so the directional bias of the market is going to be lower in the near term.”
Beef prices have remained in the upward direction, despite what’s happening in other parts of the market. Choice gained a net $1.36 compared to March 2’s close with $223.88 on March 8. Similarly, the Select cutout gained a net $2.18 with a close of $216.78. Despite these gains, however, the upward momentum is flagging.
“Product values are beginning to stall, as prices approach resistance at $225,” commented Gottschalk. “A sub-600,000 weekly production level this week is lending some support at current prices. An early Easter may lend some additional support to the beef complex. However, in recent years, the trade has mostly overstated post-Easter or April beef demand. A mitigating factor this year may be the continued gains for employment and incomes.”
The good export demand is also lending a hand too.
For the week of Feb. 23-March 1 (most complete data at print time) net export sales stood at 19,700 metric tons, up 31 percent from the prior four-week average.
“Wholesale beef prices have risen sharply on 3.1 percent larger beef production than a year ago,” Cassie Fish of the Beef Report noted early last week. “Even bears can’t dismiss this testament to excellent domestic and export beef demand.”
Feeder cattle
Weather and worries over the downward mobility of the futures has a palpable effect on the feeder cattle auctions. Most sales quoted prices as down and availability generally declined. Several sales also noted that the quality of the offerings had declined from the prior week as well.
Despite this, medium and large 1-class (#1) steers weighing between 700-800 lbs. were still reliably in the $140s-160s.
Colorado: The La Junta Livestock Commission Company sold over double the number of cattle last week as it did the week before. Feeder steers were called steady with the exception of 5-weight steer calves, which were up $3-5. Feeder heifers were up $2-3 for animals under 600 lbs., 6-weights were up $1-3, and all other heavier heifers were steady to up $1. Benchmark yearling steers sold at $155 for thin-fleshed, light yearlings, and $143-144 for others.
Kansas: At the Winter Livestock Auction of Dodge City, 7-weight feeder steers were steady to up $3, while heavier steers were called weak to down $3. A light supply of heifers traded mostly steady to down $3. Two large lots of benchmark yearling steers averaged $145.72 for the 777-lb. group, and $153.27 for the 707-lb. group.
Missouri: The Joplin Regional Stockyards sold almost 8,000 head of feeders last week, almost double what it sold the week before. Feeders of both sexes were called steady to $3 lower. Prices on #1, 7-weight yearling steers ranged from $141-160.
Montana: The Miles City Livestock Commission sold half the number of cattle last week as it did the week before, making for few comparisons. The best test was on heavy 6-weight steers, which were called generally steady. All other weights and classes of feeders were too lightly tested for a market trend. The quality of the offering was said to have deteriorated noticeably and market activity was called slow. Several smallish groups of benchmark steers saw sporadic prices that did not overlap; the 777-lb. group averaged $141, the 784-lb. group averaged $144.50, and the 729-lb. group averaged $154.57.
Nebraska: Over 1,500 fewer cattle sold at the Huss Platte Valley Auction last week than did the week before. Despite this, light steers were called $5-10 higher. Mediumweight steers were steady, and steers over 800 lbs. were down $2-3. Feeder heifers of all weights were called unevenly steady. A trio of respectably-sized lots of #1, 7-weight yearling steers sold between $153-164.25 for general steers while the “fleshy” group averaged $145.92.
New Mexico: The quality and prices were down last week at the Clovis Livestock Auction. Feeder steers under 700 lbs. were down $1-3 with instances of $6 lower, but heavier steers were up $2-4. Heifers were down $4-5. Benchmark yearling steers ranged from $141.50-151.25.
Oklahoma: Almost 13,600 head of feeders sold last week at the OKC West-El Reno sale, but prices on most feeders were down $2-4. The exception was grass cattle, which were called steady. Calves were up $4-5. Several lots of #1, 7-weight yearling steers sold, ranging from $137.50-168.
Texas: Feeders sold steady to down $3 at the Amarillo Livestock Auction last week. One group of three #1, 725-lb. yearling steers averaged $144.
Wyoming: The Torrington Livestock Commission sold almost 5,500 head of cattle last week. Light steer calves sold unevenly steady to up $5. Steers calves over 500 lbs. were the opposite. Yearling steers were $1-3 higher. Heifers were steady to down $3. Two large groups of benchmark yearling steers ranged from $149-165.
Feeder futures fell more noticeably than did the live cattle futures. Compared to the intra-week high set on Monday of $145.15 for March and $146.87 for April, Thursday’s settlements represented over a $3 loss in both contracts at $141.75 and $143 respectively.
“Uncertainty over larger fed cattle supplies ahead of us and trade tensions with foreign nations due to President [Donald] Trump’s announcement of possible increased tariffs on steel/aluminum imports will keep the cattle futures complex on the defensive,” commented Vetterkind. — Kerry Halladay, WLJ editor
