Last week’s market was a pleasant surprise. Almost everything was up or steady—a far cry from earlier expectations of what the “dog days of summer” had in store.
The cash cattle market seemed to still be catching its breath last week in the wake of the 181,900-head negotiated cash fed buy during the first week of July. By close of trade on Thursday, barely 1,000 head had been confirmed sold for the whole week, making the few quoted prices mostly irrelevant as indicators of the week’s prices.
The best prices as of press were seen at the Fed Cattle Exchange on a 142-head lot of Kansas steers, due for 1-9 day delivery. They sold for $112 live. The average prices of cash fed cattle the week before was $109.34 live and $174.60 dressed. For most of last week, analysts expected prices to be down from that level.
“Given the advance in the futures, the trend for cash prices will be higher so long as futures maintain upward momentum,” projected Andrew Gottschalk of Hedgers Edge on July 19, reversing tone from his earlier predictions.
“Producers are dug in, despite growing front-end fed cattle supplies, while packer margins remain profitable.”
Though packer margins have tumbled significantly over the past weeks from almost $300/head, last week’s estimated margins of $127/head aren’t too shabby. Profitability will bolster the willingness of packers to buy cattle and help the industry as a whole move through the large fed cattle supplies.
As mentioned, the futures gained a lot of ground. By Thursday’s settlement, the near-term live cattle contracts had gained a net $4.35 for August with $108.90, and a net $3.28 for October with $110.65. Most of these gains came in Wednesday’s triple-digit gains.
Troy Vetterkind of Vetterkind Cattle Brokerage attributed the Wednesday moves to “spec fund buying in anticipation of higher cash cattle markets.”
“In the process of trade yesterday we got the futures into some near-term price targets of $109-110 in August live cattle, $111 in October live cattle, and $154 in August feeder cattle,” Vetterkind said Thursday. “So, to see the velocity of this week’s rally slow down shouldn’t be unexpected, but do we break very hard? Probably not. We’ve approximately got a $113-114 live market priced in for this week, so unless the packer steps up and pays more for cattle, I suspect we’ll chop around up here until next week when we get the results of tomorrows cattle on feed report.”
The cutouts chopped around throughout the week, but ultimately stayed flat. By close of trade on Thursday, both cutouts had gained slightly. The Choice cutout closed at $204.49 and the Select cutout closed at $196.96.
“In the big picture, fed cattle supplies are current, beef exports and shipments are huge, and packers have a large forward sold beef position to cover, so fundamentally the market has more positives than negatives.” — Troy Vetterkind
Feeder cattle
Both cash feeders and feeder futures continued their strength from the week before. Cash feeder cattle across the surveyed auctions were almost unanimously up, with prices on medium and large #1 steers weighing between 700-800 lbs. ranging from the mid-$130s to the mid-$160s.
California: The Cattlemen’s Livestock Market of Galt sold 2,611 head with all classes of feeders called steady. A wider weight range of feeders were on offer last week, with benchmark steers selling between $135-157.
Kansas: The Pratt Livestock Auction sold fewer cattle last week with prices on feeders mixed. Feeder steers were steady to down $2 under 900 lbs. while heavier steers were up $4-5. Hiefers over 700 lbs. were steady to up $1, with too few lighter heifers or calves of either sex for a market trend. Number 1, 7-weight steers sold for $135-144 for calves and $146.10-151 for yearlings.
Nebraska: The Loup City Commission held its first sale in a few weeks, meaning there were no market trends. Demand was called moderate to good. One 32-head lot of #1 yearling steers averaging 702 lbs. brought $145.
New Mexico: Sales volumes were up last week at the Clovis Livestock Auction. Prices were also up with feeder steers mostly $4-5 higher and instances of up $8 on light 6-weights. Light heifers were steady to up $3 and up $3-4 on heifers over 600 lbs. One large lot of 150 head of 777-lb., #1 yearling steers averaged $148.26, while three head of value-added, 708-lb., #1 calves averaged $145.
Oklahoma: Sales volumes were down at the OKC West-El Reno sale last week, but feeders sold up $3-6. There was good demand on all classes and active trade. Benchmark yearling steers ranged in price from $149-163.
South Dakota: The Mitchell Livestock Auction sold a third of the volume they sold the week before. Most comparable prices on feeders were steady, but there were few of those as a result of the volume difference. The best test was on feeder heifers over 850 lbs. which were up $5-10. Two lots of benchmark steers sold between $150.25-159.
Feeder futures, like live futures, made impressive triple-digit gains last Wednesday, making for an overall “up” week. The near-term contracts gained about $3.50 over the course of the week, with the August contract settling July 19 at $154.45 and the September contract settling at $154.77.
“In the big picture, fed cattle supplies are current, beef exports and shipments are huge, and packers have a large forward sold beef position to cover, so fundamentally the market has more positives than negatives,” opined Vetterkind.
“It’s the middle of July and I think we’re going to end up selling fat cattle for $113-115 this week, when two months ago everybody had a $95-98 market predicted for the first of August. I think the market is on much better footing than previously thought.” — Kerry Halladay, WLJ editor
