Last week saw a reversal of the recent trend of late-week negotiated cash fed cattle trade. By Tuesday, over 50,000 head had been confirmed sold. This compares to the week before where almost all of the over 134,000 head of cash cattle sold late on Friday afternoon.
Prices on cash cattle wavered throughout the week. At its height, prices were $125-128 live and $200 dressed. This compares to the prior week’s sale prices of $121-125 live and $194 dressed.
The live cattle futures closed up over the course of the week. The February contract gained a net $1.82 with a Thursday settle of $126.42. The April contract similarly gained $1.30 with a settle of $125.92.
These gains came entirely from Thursday’s trade following strong losses on Wednesday.
“The live market closed sharply higher, supported by aggressive short-covering, technical buying and the bullish lead of feeder futures,” said DTN’s Livestock Analyst John Harrington on Thursday afternoon.
“While most trading is probably done for the week, packers will have to pay more given the late hour and board’s recovery if they still have slaughter needs.”
Beef
Beef prices advanced last week with most analysts attributing the gains to reductions in production rates. Expectations for last week’s production rate were for 610,000 head. This compares with the winter storm-shortened production week of Jan. 22-26, which only saw 588,000 head processed.
“This reduction in weekly production is normal during February, as it generally records the lowest weekly slaughter levels of the year,” commented Andrew Gottschalk of Hedgers Edge.
Beef cutout prices advanced last week and reached the near-term resistance level of $210 for Choice. Select gained about $3 over the course of the week to settle at $204.54.
“Product values will continue to advance amidst reduced weekly beef production,” Gottschalk continued, adding, “The next price target is $215-216.”
Demand is and will continue to be a focus of the marketplace.
“Robust domestic and export beef demand should help absorb the additional supply and support fed cattle values into the spring,” commented the CME Daily Livestock Report on the matter of the eventual ramp-up in ready fed cattle numbers later in spring.
“It continues to be imperative that feedlots maintain the marketing pace, which so far they have been able to accomplish thanks to the improvement in demand. The risk to the downside will come if fed cattle prices run up ahead of fundamentals and negatively impact retail beef features for the spring.”
Feeder cattle
The feeder situation was mixed last week. On the one hand, many auctions had larger volumes and noted strong demand for certain classes of cattle. On the other, most auctions reported declining prices even in the face of gaining futures and fed cattle markets.
Medium and large 1-class (#1) steers weighing between 700-800 lbs. were again solidly averaging in the upper-$140s to lower-$160s. Prices were seen +/-$10 of that range, but it was not common.
Colorado: The Winter Livestock auction of La Junta sold slightly fewer cattle last week than the week before, but comparable sales saw higher prices for the most part. Steers were called steady to up $2. Exceptions existed for 5- and 6-weights which saw instances of up $5, and 7-weights which were down $3. Heifers were steady to up $2 for the most part and up $2-4 on heifers over 700 lbs. Benchmark steers ranged from $145.50-153.50.
Kansas: Volumes were up and prices were down at the Winter Livestock Feeder Cattle Auction of Dodge City. Steers weighing between 600-1,000 lbs. were called steady, while most heifers were steady to down $6 with discounts going to heavier heifers. Calves were lightly tested. Two groups of #1, 7-weight traded between $145-151.25.
Missouri: The Joplin Regional Stockyards sold more cattle last week at lower prices. Calves were called steady to down $5 with preference for heavier animals. Seven-weight yearlings of both sexes were called steady to up $3. Demand was called good. One large group of #1, 777-lb. yearling steers averaged $147.89, while a four-head group of light but fleshy yearlings averaged $137.
Montana: Volumes edged up slightly at the Public Auction Yards last week. There were too few comparable sales for a proper market trend, however lower undertones were noted. Very few benchmark cattle sold, with averages at $152.52 and $144.58.
Nebraska: Volumes were up and prices were called fully steady at the Huss Platte Valley Auction. Buyer interest was said to be strong on the weaned calves and yearlings. Baldie- and Hereford-influenced feeder heifers were popular with buyers as possible replacements. Numerous lots of benchmark steers sold between $148-161.50 for yearlings and $140-147 for calves.
New Mexico: Volumes were up at the Clovis Livestock Auction market, and a lower undertone was noted. There were too few comparable sales for a proper market trend. A small group of benchmark calves averaged $128.50 while a large group of yearlings averaged $140.95.
Oklahoma: The OKC West-El Reno sale sold over 12,000 head last week, but steers were mostly $1-3 down. Heifers were down $3-5. Calves were down $3-6. Prices on #1, 7-weight steers ranged from $146-161.50.
South Dakota: Several thousand head of additional cattle sold at the Hub City Livestock Auction last week. Feeder cattle classes were steady to up $5. Demand was called good to very good. Several groups of benchmark cattle sold between $141.50-170 with most averages ranging from the upper-$140s to mid-$160s.
Texas: The Amarillo Livestock Auction was fairly steady on its volumes, with prices ranging from steady to $5 lower on feeders. Not many benchmark steers sold; only four 747-lb. calves sold for $136.
Wyoming: Sales volumes at the Riverton Livestock Auction were a third of what they had been the week before. The sale was a special bred cow sale, making for too few feeders for a good market test. There were no #1, 7-weight steers sold, but 23 head of #1, 6-weight steer calves averaged $170.08.
Feeder cattle futures followed live futures upwards on Thursday’s sudden surge. Near-term feeder cattle futures traded at or near limit-up levels, ultimately making the week a profitable one.
By Thursday, the February contract settled at $149.55 and the March contract settled at $150.12.
CattleFax outlook
The CattleFax long-range outlook is always one of the biggest draws at the National Cattlemen’s Beef Association annual conference. This year was no exception as the major ballroom filled up early Thursday morning. Several analysts from CattleFax presented information on everything from weather, to market fundamentals, to cattle price outlooks.
On the upside, everyone described a 2018 with a strong economy with rising GDP and consumer optimism, and continued low levels of unemployment and profitability across all sectors of the industry.
On the downside, however, there are strong indications that the drought will continue to develop and worsen into the summer, and that beef production will continue to grow through to 2020.
“We need to expand and see record exports to keep these record production levels from overwhelming the market,” pressed Randy Blach, CEO of CattleFax.
“You know how important these trade agreements are going to be for us down the road.”
Another area of concern is the lack of packing capacity in the face of the growing fed cattle supplies.
“We don’t have enough harvest capacity for the growth we’ve had in the cow herd,” Blach explained, showing the packed audience projection charts showing growing fed cattle slaughter through to 2020. If realized, the projections would represent a new record broken every year.
“Record-large beef production is expected in 2018 at 27.5 billion pounds,” read the CattleFax summary. “Annual production increases will be smaller into the 2020s—peaking at more than 29 billion pounds.” — Kerry Halladay, WLJ editor
