“Both the cattle market and those that trade it are all waiting on this week’s negotiated cash cattle trade to commence,” observed Cassie Fish of the Beef Report on Thursday afternoon.
The cash trade, in turn, was almost certainly waiting on Friday’s Cattle on Feed report to drop. Pre-report expectations placed on-feed populations at up 3.4 percent of June 1, 2017, placements down 4.2 percent, and marketings up 5.2 percent.
By close of trade on June 21, only 7,237 head had been confirmed sold. Though not enough to set a trend, prices were $110-113 (average $112.01) live and $173 dressed. On Wednesday, which had seen more volume trade than Thursday, the dressed prices were $178. Predictions on what the prices would be varied depending on analyst.
“Need to keep in mind packers only bought 60,000 head of negotiated cattle last week and of those only 38,000 head were for one- to nine-day delivery,” noted Troy Vetterkind of Vetterkind Cattle Brokerage.
“Packers have the largest weekly slaughters planned for 2018 this week and next so they are going to need to reload on inventory despite being in the middle of peak fed cattle supplies for the summer. Feedlots have done a good job in staying well sold coming into this period of peak fed cattle supplies and are quite current so it’s not like they don’t have any leverage in price negotiations too.”
The near-term live cattle futures spent most of the week making minor gains. Thursday’s trade was down slightly, but not enough to wipe out the earlier gains. By Thursday’s settlement, the June contract had gained a net 20 cents with $108.65, and the August contract gained a net $1.35 with $106.12.
“CME cattle futures are consolidating after earlier week gains and the market once again has reached a modestly overbought status,” observed Fish on Thursday afternoon.
“But this market refuses to get ahead of itself even though it acts better than many expected for the third week in June.”
Cutouts continued downwards last week. The Choice cutout lost about $5 over the course of the week and Select lost about $1 with closes of $217.41 and $201.61 respectively.
Andrew Gottschalk of Hedgers Edge suggested that it is worth remembering that demand “continues to be the driver in 2018.”
“It is demand that has made the difference in 2018,” commented Fish on a similar vein. “Q2 beef production will end up 5.8 percent over 2017 and the largest since 2008. Yet wholesale beef prices are well above wholesale prices from 2013 or any year prior. Retail prices too are averaging substantially above pre-2014 levels. Beef prices may be lower than levels reached during recent years but are still dramatically higher, with much larger production. This speaks well of the global economy.”
Feeder cattle
The surveyed feeder auctions were doing well last week. In many places offerings were lower, but prices were almost entirely higher. Medium and large #1 steers weighing between 700-800 lbs. sold mostly in the upper-$140s to low-$150s.
California: Prices and volumes at the Cattlemen’s Livestock Market were up considerably. Benchmark steers sold for $140-147.
Kansas: At the Pratt Livestock auction, comparable trades in feeder steers were up $4 on a light test. Number 1, 7-weight steers averaged $150.50.
Montana: The Billings Livestock Commission sold only 633 head last week, compared to the over 4,100 head sold the week before. No trend was possible as a result, but market activity was called moderate to active. The one lot of #1, 7-weight steers sold for $151.50.
Nebraska: The Loup City Commission held its first sale in several weeks, meaning there was no trend possible. Demand was called moderate to good however. The single lot of #1, 702-lb. yearling steers averaged $145.
New Mexico: Sales volumes were generally steady and prices on feeders were mixed but mostly up at the Clovis Livestock Auction. Light steer calves were down $1-2, while steers over 500 lbs. were up $4-10. Heifers were mostly $2-4 higher, with the exception of some attractive 7-weights that sold up $10. A pair of benchmark lots averaged $147.51 for the 710-lb. lot and $142.72 for the 762-lb. lot.
Oklahoma: The OKC West-El Reno sale sold over 13,400 head last week. Feeder steers were called steady to up $4, with preference for steers over 800 lbs. Heifers were up $3-5. Benchmark steers fetched between $144-151.
South Dakota: The Mitchell Livestock Auction saw feeder steers trade $1-2 higher and heifers uneven. Demand was called good for the offering of mostly backgrounded yearling feeders. Prices on #1, 7-weight steers ranged narrowly from $149.75-151.50.
Like the live cattle futures, the feeder futures saw net gains over the course of last week. The August contract gained about 50 cents with $148.47, and the September contract gained about $1 at $149.25.
“I think the futures market has some friends now that the funds have turned back to being net long the market and I believe we are in the beginning phases of finally taking the futures premium to cash,” commented Vetterkind on Thursday.
“The [futures] market should find some pretty decent support now $1-$2 below the [cash] market.” — Kerry Halladay, WLJ editor
