Despite expectations, the markets closed mostly down in late week losses. The one saving grace was the price gains in the cutouts. Choice gained about $2 over the course of the week to close at $223.58. The Select cutout closed at $208.87, up 40 cents.
That was the good news.
Near-term and even deferred futures all but imploded on Thursday after a relatively steady week. The live contracts got off far easier than the feeder contracts did, but every contract lost over $2 on Thursday alone. For feeder futures, the three front-month contracts closed limit down, opening up Friday’s trade for extended limits.
“The continued weakness in feeder cattle trade and uncertainty about corn supplies sparked additional pressure in live cattle futures,” commented DTN’s Rick Kment.
By close of trade Thursday, the June live cattle contract had lost a net $1.10 to settle at $110.08. The August contract lost a net $2.90 with a $105.05 settlement.
“Although markets were able to move back from limit losses at closing bell, concerns remain about additional losses through the next couple of weeks,” Kment noted.
“The August futures tested contract lows Thursday afternoon, with a move below that level in upcoming sessions likely to lead to active liquidation and further market losses.”
The feeder cattle futures were down roughly a net $5 over the course of the week last week, with August settling Thursday at $138.23 and September at $138.53.
“The feeder cattle complex was already weakened over the last six weeks by increased placement levels over the past two months sparking additional supply concerns,” Kment continued.
“But planting delays that have caused corn and soybean prices to surge higher through the end of May have left the complex with little to no stability. This is causing traders to liquidate positions due to uncertainty of feed costs and the impact this will have on beef values through the next several months.
Cash fed cattle last week were mixed compared to the prior week, disappointing market watchers’ expectations of a steady to higher cash trade.
“Initial resistance is $118, followed by $122-124,” commented Andrew Gottschalk of Hedgers Edge. “Long-term resistance is $128.”
He continued, noting that “Front-end fed cattle supplies project to mirror 2018 from July 1-Sept. 1. The Y/Y increase posted to date in this category of cattle will be reduced during the aforementioned period. The ‘dog-days’ of summer (from July through August) must still be navigated. Even in the best of supply conditions, prices have a difficult time advancing during this period.”
By close of trade Thursday, over 34,800 head of negotiated cash fed cattle had been confirmed sold for the week. Prices ranged from $115-117 (average $115.61) live and $186-188 ($186.96) dressed.
Cash feeders—when they sold—were also mixed. Many auctions across the country called off sales last week, likely due to the Memorial Day-shortened week. The few auctions that reported sales mostly saw lower prices and higher volumes, though that varied with quality of the offering. Most averages on medium and large #1 steers weighing 700-800 lbs. were still in the $140s.
Kansas: The Winter Livestock auction of Pratt sold 3,200 head of feeders, more than double what was sold the week before. As a result, there were few comparable sales to get a market trend. The best comparisons were on heavyweight steers ($2-3 lower) and heifers in general (steady to down $1). There were no trends on feeder calves. Two lots of benchmark yearling steers sold between $132.25-146.
New Mexico: The sales volume was up at the Clovis Livestock Auction compared to the prior week, but prices were mostly down. Most feeder steers under 600 lbs. were called $4-5 lower, with the exception of 3-weights, which were up $2. Six weights were also up $2. Steers over 700 lbs. were down $1. Heifers under 600 lbs. were down $5, while heavier heifers were down only $1. Two small lots of #1, 7-weight steers sold between $131.50-141.25.
Oklahoma: The OKC West-El Reno sale sold almost 8,500 head of feeders last week. This was down from the impressive 10,400+ head sold the week before, but while volumes were lower, prices were up. Feeder steers sold up $1-4 with the greatest advance being on steers over 800 lbs. Heifers traded up $1-2. No trend on calves due to too few sales. Demand was called good. A pair of #1, 7-weight yearling steer lots ranged from $139-143 while a group of four, #1, 731-lb. unweaned steer calves averaged $130.
South Dakota: The Hub City Livestock Auction sold double the number of cattle last week compared to the week before. Prices on steers were mostly steady, with the exception of cattle over 850 lbs., which were $1-4 lower. Heifers were poorly tested with best test on 8-weights, which were steady. Demand was moderate to good on the offering, which included several strings of feeders, some of which were value added. In benchmark steers, standard quality yearling steers ranged from $130-154.50. Two respectably-sized lots of NHTC steers averaged $159.
“Feeder cattle will continue to have limited rebound potential, given the advance in feed grain prices,” commented Gottschalk. — Kerry Halladay, WLJ editor
