All in all, it was a pretty sideways week last week. Cash fed cattle and feeder cattle prices were in line with the prior week’s, and futures prices and beef cutout prices were slightly down.
Last week’s cash fed cattle trade got underway in a big way last Wednesday, with over 67,000 head being confirmed sold at $118-120 live and $187-190 dressed. These prices were at the lower end of the prior week’s cash fed price range. Thursday’s additional 26,000 head in cleanup trade narrowed the range to $119-120 live and $188-190 dressed. These prices were roughly in line with market analysts’ early-week predictions of a steady to slightly down cash fed trade compared to the week before.
“The cash cattle trade continues to correct lower after the sharp and fast late October rally,” noted Troy Vetterkind of Vetterkind Cattle Brokerage last Thursday morning.
“Perhaps we’ll see packer competition pick up for cattle next week or the week after as they line up some bigger kills for the first couple of weeks in December to finish up holiday beef orders, but I think for now we’re going to go into an upper teens/lower $120s type of fed cattle market until after the first of the year now.”
Some of the Thursday strengthening in the cash fed market could be attributable to the gains seen in Wednesday’s futures trade. It wasn’t much as far as daily gains go, and those gains were entirely lost in Thursday’s trade, but it had some effect.
Compared to the settlements posted in near-term live cattle contracts on Friday, Nov. 10, live cattle futures lost value last week. Thursday’s settlement saw the December contract off a net $1.02 at $119.55 and the February contract was off a net $1.63 at $125.12.
“It is interesting to note that despite the recent price decline, fed and feeder cattle futures remain in their respective uptrends,” commented Andrew Gottschalk of Hedgers Edge. “Technically, the $118.70 level basis the December fed cattle contract is critical to maintaining the uptrend.”
Gottschalk warned that “the large net long position of ‘funny money’ is the greatest risk to this market short term,” and said that the market is entering an “oversold” level.
Vetterkind additionally voiced his opinion that the Cattle on Feed report, which came out after printing on last Friday, was already factored into the futures.
“We’ll have to see if there are any surprises in the report that may move the market Monday morning.”
Beef
Both packer margins and beef cutouts were down last week, the former more spectacularly than the latter. Packer margins started the week at about $49/head. By Thursday, the estimate had fallen to $22/head. The Choice cutout lost a net $3.61 to close Thursday at $210.24, and the Select cutout lost a net $6.68 with $187.83.
Buying last week for a short kill schedule this week likely worked out well for the packers. Steady fed cash cattle prices and declining cutouts do not pencil out well for packer margins, but restricted kills can stop those declines.
Retail and consumer beef demand after Thanksgiving is expected to be strong, which will also help.
“Early Christmas promos aided store traffic lending support to the meat counter. Beef was the sales leader with pork and chicken trailing at a distance,” reported Gottschalk early last week, noting that some retailers may raise middle meat prices in an attempted to regain margins on those items.
“Increasing employment and rising incomes should minimize any negative impact of rising middle meat prices,” he added, though. “Wages are rising the fastest in the lowest income groups who will spend every new dollar, lending support to the beef complex.”
Some good news—dare it be called an early gift?—surfaced last week. The foreboding backlog of cattle in feedlots hasn’t started. Yet.
“Front-end fed cattle supplies are beginning to increase relative to last year. Offsetting this gain is positive carcass weight data. There is no backlog of fed cattle at this time,” Gottschalk related last Thursday. “The greatest risk of a backlog, coupled with a [year-over-year] increase in carcass weights, is during the late winter and spring of next year.”
Feeder cattle
Feeder cattle auctions were mixed last week, though medium and large 1-class (#1) steers weighing between 700-800 lbs. did not seem to suffer negative price effects where they were offered. The price divides between calves vs. yearlings, and short-weaned vs. long-weaned calves are getting more stark and frequently noted in auction reports.
Colorado: The Sterling Livestock Commission Company sold fewer cattle last week than the week before. Feeders were called steady on a light test. A pair of #1, 7-weight offerings sold at $151 for the 708-lb. group and $146.50 for the 773-lb. group.
Iowa: The Bloomfield Feeder Cattle Auction did not hold a sale recently, meaning there were no comparisons to make in last week’s sale. Trade was called active on good demand. Numerous benchmark steer offerings were reported, ranging from $150-173.85, inclusive of calves.
Kansas: The bulk of the yearling feeder trade at the Winter Livestock Feeder Cattle Auction of Dodge City was called down $3-6, though some few light 7-weight steers sold up $3-6. Calves were called extremely uneven, with long-weaned, preconditioned calves with several rounds of shots in them were up instances of $8-12, while bawler calves and even short-weaned calves were said to have a lower undertone. A sharp divide was seen in the benchmark sales between calves and yearlings. Calves ranged from $140-153 while yearlings were $160.50-165.
Missouri: The Joplin Regional Stockyards sold over 6,000 head of feeder cattle last week. Steer calves were called steady, and yearlings were steady to down $2. Heifers of all ages were down $3-6. The weakness was attributed to declines in the futures markets last week. Offerings of #1, 7-weight steers were inconsistent. A large lot of 101 head averaging 710 lbs. brought an average of $159.13. The rest of the offerings were small and were as follows: 758-lb. yearlings at $159; 784-lb. calves at $152; and 777-lb. “fleshy” yearlings at $146.
Montana: The Miles City Livestock Commission sold more cattle last week than the week before. Steer calves under 400 lbs. and yearlings were too lightly tested for a market trend. Heavier steer calves were called down $6-10 with the exception of value-added calves, which were steady. Midweight heifer calves were steady to down $5, with discounts being heavier on lighter calves. Number 1, 7-weight steer calves sold between $148-150.
Nebraska: More cattle sold last week at the Huss Platte Valley Auction, and prices were called unevenly steady on all classes. Several good-sized groups of benchmark steers sold between $160-170.75, inclusive of calves.
New Mexico: More cattle sold at the Clovis Livestock Auction last week, but at higher prices than the week before. Feeders were called mostly $1-2 higher with instances of $4-5 higher on feeders over 600 lbs. Three classes of benchmark steers sold; calves from $125-130.50, value-added calves from $128-144.50, and a 25-head lot of yearlings averaged $148.
Oklahoma: The Oklahoma sales are known for big sales volume, but last week was impressive even relative to that. The OKC West-El Reno sale sold 14,548 head of feeders last week. Unfortunately, the larger volumes came with lower prices. Feeders of both sexes were down $3-6 with some instances of down $9 on heavier offerings. Lightweight, weaned calves were down $2-4, with unweaned and/or heavier calves called “much lower.” Despite this, the prices on #1, 7-weight steers remained strong, ranging from $149-163.50, with calves setting the low.
South Dakota: Prices were down or poorly tested last week at the Hub City Livestock Auction, which sold over 1,600 more cattle last week compared to the week before. Yearling sales were not well compared. Steer calves under 600 lbs. were called steady, but heavier steer calves were $5-8 lower. Heifer calves were mixed with little pattern to the discounts and premiums, which ranged from down $6 to up $3. Calf offerings were said to be mostly straight off the cow with minimal if any preconditioning. Two large offerings of benchmark steer calves averaged in the low $160s.
Texas: Sales volumes were down at the Amarillo Livestock Auction, making for too few comparable sales for a market trend. Trade activity and demand were called moderate to good, though it was noted that buyers were hesitant on unweaned calves in the wake of roller coaster temperatures and related concerns over illness. The only lot sold of #1, 7-weight steers was a 12-head group of 708-lb. calves. They sold for $129.
Wyoming: There were very few comparable sales on feeders at the Torrington Livestock Commission. For the yearlings that traded, they were called steady. Calves were unevenly steady to down $2. A 30-head lot of #1 yearling steers averaging 702 lbs. sold for $161, while a 26-head lot of #1 steer calves weighing 718 lbs. averaged $152.66.
Feeder futures fell more than their live cattle counterparts. The November contract ended its trade Thursday at $157.77—down a net 70 cents from the prior Friday’s settlement—and left the board on Friday. The January contract lost a net $3.27 with a Thursday settlement of $153.90.
Vetterkind opined that the January feeder contract will likely see retracement levels down to 38 to 50 percent, meaning $152.15 to $149.07.
“I wouldn’t expect it to all happen at once,” he noted however. “We’ll see how this all plays out in a day or two but suffice it to say the packer may have a little leverage over the market for a couple weeks but we still have a lot of winter ahead of us.” — Kerry Halladay, WLJ editor
