The markets were in something of a holding pattern last week ahead of the release of the Cattle on Feed report. The report was released on Friday, Sept. 21 after WLJ went to press. Pre-report expectations were for the on-feed population to be up 5.5 percent, placements up 4.8 percent, and marketings flat.
“Last month saw above average placements for July, and placements are expected to be large once again in August,” noted the CME Daily Livestock Report.
“In part, historical numbers indicate that seasonally August placement should be larger than July, but ahead of the report one of the big questions is whether July placements had pulled-in cattle that would have normally been placed in August,” the report went on.
“Analysts are split between those believing that placements will be rather large again on a percentage basis (over 5 percent of last year) and those that expect placements to be more moderate based on the number placed in July. The big takeaway, however, is that even at the low end of the analysts’ range, placements are still expected to be the largest since 2012. Those on the high end of the range expect it to be the largest since 2011.”
Some noteworthy trade volume (almost 24,600 head) had developed by close of trade Thursday, but prices were relatively steady with the prior week with averages of $110.53 live and $174.98 dressed.
“The premium futures has producers holding firm,” commented Andrew Gottschalk of Hedgers Edge on Thursday morning. “Futures will dictate the trade level, as hedgers are unlikely to sell any cattle this week at less than $1.50-2/cwt below the October futures. Expecting this basis to narrow during October, the decision will be to hold if the aforementioned basis level is not achieved. The determination of the sellers to hold cattle will only intensify during the fourth quarter, with the December futures approaching a $5/cwt premium to October futures.”
This prediction rang true to at least Thursday’s trade, as the October live contract settled at $112.45, a net decline of $1.35 over the course of the week. The December live cattle contract lost a net 15 cents over the week, settling at $117.90.
“The cattle futures market continued to consolidate yesterday after last week’s strong gains,” commented Troy Vetterkind of Vetterkind Cattle Brokerage on Thursday.
“The market is awaiting direction from this week’s cash trade before making its next move, which I think is going to be higher. Solid support should be found at the breakout areas of $112 in Oct. live, $116 in Dec. live, and $155 in Oct. feeders. Still targeting $116-118 in October live cattle, $122-124 in December live cattle, and $164-166 in October feeder cattle. These are price counts above the market and I think they are attainable given a strong seasonal tendency for the cash market to move higher into the fourth quarter due to tightening fed cattle supplies in the coming weeks.”
Despite intra-week gyrations, the cutouts closed mixed last Thursday compared to the prior Friday’s close. The Choice cutout gained a net 25 cents at $204.52 and the Select cutout lost $1.56 to close at $194.91.
“The Choice beef cutout value is within the previously identified support at $202-205,” noted Andrew Gottschalk of Hedgers Edge.
“Look for stepped-up buying to occur—indeed daily reported volumes for this week are already strong. October beef demand generally increases by 1.4 percent from September, as holiday pricing becomes more aggressive. Beef demand to-date during September has fallen short of its seasonal trend, normally a 2.8 percent gain from August.”
Despite this, Gottshalk said economic indicators remain positive and are supportive of demand.
“Some firms are electing to give bonuses to employees, as opposed to raising wages. These bonuses do not show up in the wage data released by the government. We have repeatedly stated that current measurements of income do not provide a full accounting of recent consumer income gains.”
He also added that Hispanic incomes were reported at a record high. “This is another indicator verifying the breadth of wage and income gains in this economic expansion.”
Feeder cattle
Demand was generally very good across the surveyed feeder cattle auctions. Calves are starting to become a more dominant force in the feeder offering, but there is a noticeable divergence in prices between calves and yearlings, as well as preconditioned calves and calves that were shoved on a truck without preparation.
Medium and large #1 steers weighing between 700-800 lbs. were not hard to find in last week’s market, with prices trending more towards the cusp between $150s-160s.
Colorado: The La Junta Livestock Commission Company sold fewer cattle last week than the week before. Calves were mostly steady, save for 4-weights, which were down $3-5. Yearlings were too lightly tested for a market trend. Nine head of #1, 7-weight yearling steers sold, averaging $155.
Iowa: There was no comparison on the Bloomfield Feeder Cattle auction last week. Yearling trade was called active on good to moderate demand. Two lots of benchmark steers sold; the 713-lb. lot of 137 head for $168.73, and the 793-lb. lot of 30 head at $159.51.
Kansas: Every reported class of feeder cattle was higher last week at the Winter Livestock Auction in Dodge City. Eight-weight steers were called $4-5 higher and 9-weights were $1-2 higher. Other weight classes of steers were said to have a higher undertone. Heifers were up $5-7 on 5-weights, $3-4 on 6-weights with instances of $9 higher. This sale was a special calf sale, with a higher undertone and very good demand on the attractive calves. One 52-head lot of #1, 723-lb. yearling steers averaged $164.35.
Missouri: Sales volumes fell slightly at the Joplin Regional Stockyards last week, but prices were higher. Calves traded steady to up $4 and yearlings were up $3-5. Two lots of benchmark cattle sold, with averages at $157.21 for the 735-lb. lot and $156.82 for the 763-lb. lot.
Montana: Almost 13,600 head sold last week on the Northern Livestock Video Auction’s Fall Premier sale. Trade was called moderate to active on moderate to good demand. The best demand was on heavy, weaned calves, particularly those that had a solid pre-conditioning program behind them. Benchmark calves for October delivery averaged $166.21, while calves for December delivery averaged $168.
Nebraska: The Huss Platte Valley Auction saw a 1,000-head increase in their sales receipts last week. Compared to the prior sale, heavy steers sold steady to up $4 and heavy heifers sold steady to up $2. No information on light yearlings or calves. Demand was called good. As with other sales, two lots of #1, 7-weight steers saw narrow averages of $162.10 for the light (746 lbs.) lot, and $159.86 for the heavy (768 lbs.) lot.
New Mexico: Sales stayed steady at 3,546 head sold at the Clovis Livestock Auction last week. Steers under 600 lbs. were steady to up $1, while heavier steers were up $5. Heifers were steady and steady to up $1 along that same weight breakdown. Several lots of benchmark steers sold, but the market was split between calves and yearlings. The calf lots sold between $129-133.75, while the yearling lots sold between $152-160.
Oklahoma: The Oklahoma National Stockyards sold 8,453 head of feeder cattle. Steers and heifers sold $1-6 higher, with heavier calves $2-5 higher. Light calves were not tested. Demand was called good to very good. Several lots of benchmark steers sold with yearlings ranging from $145.50-164.50, and the one calf lot averaging $144.75.
South Dakota: The sales volume last week was less than half of what it had been the week before. This made feeder classes poorly compared. The best test was on 9-weight steers, which were up $3. Two lots of benchmark steers sold between $164-171.
Wyoming: The Torrington Livestock Commission didn’t sell enough calves for a proper market test, but yearlings were selling up $6-10. Number 1, 7-weight yearlings sold between $161-170.
Near-term feeder futures lost about $1.50-2 over the course of last week, with the September contract settling at $155.67 and the October contract settling at $157.27.
“With the exception of some upward movement in the nearby September feeder contract, which will expire next week, futures were lower Thursday,” commented DTN’s contributing analyst Elaine Kub.
“These deferred contracts may have been spooked by the suddenly higher prices seen in the feed grains markets Thursday.” — Kerry Halladay, WLJ editor
