The markets were a mixed to lower affair last week with cash cattle playing hard to get and futures yo-yoing back and forth all week.
By the close of trade Thursday, barely even 3,500 head had been confirmed sold on the negotiated cash fed cattle market; too low for a market trend. Expectations were for a $1-2 decline on the prior week’s mostly $117-119 live and $186-188.50 trade.
Live cattle futures last week were ultimately up compared to the prior week’s close, but they did little but trade gains and losses throughout the week. By close of trade Thursday, the December contract had gained a net 70 cents over the week with a settle of $116.27 and the February contract gained a net 85 cents with $119.15.
“Even if cash comes in steady this week, I don’t think we’ve got much rally potential in the futures right now,” opined Troy Vetterkind of Vetterkind Cattle Brokerage on Thursday morning. “I think we’re going to see sideways/lower cash through the holidays.”
Andrew Gottschalk of Hedgers Edge called both futures complexes “oversold” level. Usually this means there is rally potential, but he had measured words for the future.
“Historically, during the prior 25-year period, fed cattle futures had a strong tendency to rebound into mid-January.” He added however, “that there is no guarantee that history will repeat itself.”
Beef demand continues to be a focal point in the industry. On the short-term level, retail beef demand has slacked because retailers have already procured the beef they need to fill holiday orders. This has put pressure on cutouts, which have continued a slow decline into Choice support levels of $200-202. By close of trade Thursday, the Choice cutout stood at $201.04, a net loss of $4.55 over the course of the week. Select closed at $183.69, a net loss of $2.28 over the week.
However, when measured on the seasonal level, beef demand has been spectacular.
“Beef demand remains positive, encouraged by growing consumer confidence, which has reached a 34-year high,” said Gottschalk. “Retail beef prices are trending above year-ago levels, while beef production [year-to-date] is up 3.8 percent. Selling more of any product at higher prices fulfills the classic definition of rising demand.”
Feeder cattle
Despite the expected declines in the cash fed market, the feeder cattle auctions saw some impressive gains with only a few auctions seeing declines.
Medium and large 1-class (#1) steers weighing between 700-800 lbs. generally traded in the $140s-160s, with cattle from the southern border seeing discounts. The recent trend of discounting on calves seems to have diminished.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City sold fewer cattle last week at mixed prices. Midweight steers were steady, heavy ones were up $2, calves were down $3-6. Heifer calves were also down $3-6 while yearling heifers were steady. Benchmark yearling steers averaged $150.40, with calf averages down $2 by comparison.
Nebraska: The Huss Platte Valley Auction doubled their sale volume last week with feeders selling steady to higher. Light yearling steers were up $5-10, midweights were steady to up $3, and heavyweights were up $7. Yearling heifers under 650 lbs. sold $7-10 higher while heavier heifers were a mixed steady. Calves were poorly tested. Number 1, 7-weight steers ranged from $153 for fleshy yearlings to $171 for thin-fleshed yearlings.
New Mexico: Feeder steers were called mostly steady at the Clovis Livestock Auction last week. Heifers were steady on heavier animals and down $1-3 on those under 600 lbs. Benchmark steers—both yearlings and calves—ranged from $125-136.50.
Oklahoma: The OKC West-El Reno sale sold almost 11,000 head of feeders last week. Unfortunately, prices on yearlings were down $3-5. Feeder calves over 500 lbs. suitable for grazing were up $4-8 however. Lighter calves were steady to up $2 with preference for heifers. Averages on the large groups of #1, 7-weight steers were solidly in the upper $140s for both yearlings and calves.
South Dakota: The Hub City Livestock Auction saw excellent price gains on feeder calves, with instances of up $10-12 on steer calves. Heifer calves were steady to up $5. Yearlings were lightly tested. The sale also posted the highest averages on benchmark steers of all the surveyed auctions with one group of calves averaging $161.05 and the other averaging $169.63.
Wyoming: Over 5,100 head sold last week at the Torrington Livestock Commission Co. Yearling steers were called steady while heifers were down $5-7. Calves were down $2-5 for steers and heifers were down $5-8.
The near-term feeder cattle futures were up about $1 over the course of the week. The January contract settled Thursday at $146.25 and the March contract settled at $144.35.
“In the feeder cattle [futures] January and March are going to have a tough time with the $146-148 level with both those contracts having risk down to $141,” commented Vetterkind. “Look for continued choppy two-sided trade with a bias to the downside.” — Kerry Halladay, WLJ editor
