“There was cash cattle trade on a Wednesday!” rejoiced Andrew Gottschalk of Hedgers Edge on Thursday morning. “In a related story, Bigfoot was seen wandering in Montana.”
Having over 64,000 head of negotiated cash fed cattle trade on Wednesday did seem similarly fictional given recent standards. Prices on cattle ranged from $108-110 (average $109.22) live and $172-174 ($172.96) dressed. These prices, in keeping with market analysts’ predictions, were steady at best with the prior week’s averages of $109.98 live and $173.08 dressed.
Though mid-week cash trade at a relevant volume was worth note, the major attention-grabbers in last week’s market were the gaining Choice cutout and the strong growth in linked packer margins. Over the course of the week, the Choice cutout rose about $3 to close Thursday at $214.37. The Select cutout saw similar gains with a close of $203.99.
“Some of the improvement in Choice Beef cutout value can be tied to rising prices for 50 percent lean beef trim prices since mid-year,” noted the CME Daily Livestock Report on Thursday.
Several things went into creating this situation of rising 50 percent trim tides. One has been the relatively lighter fed cattle carcass weights, meaning there is less trim from that usual source. According to USDA’s Agricultural Marketing Service, about 7 percent of a Choice beef carcass by volume goes into 50 percent lean trim. A second has been the increased cow (both dairy and beef) slaughter, meaning there’s more lean product in need of mixing with fatty trim. And third, demand for ground product has continued to remain strong.
“Demand factors remain favorable,” commented Andrew Gottschalk of Hedgers Edge. “However, back to school spending will dominate many consumers’ allocation of funds, thereby slowing meat sales near term.”
Stagnant cash fed cattle prices and growing cutouts makes for higher packer margins. As of Thursday morning, per-head margin estimates stood at $241.65 according the Hedgers Edge. That was up about $73 compared to the estimates on Aug. 17.
“Packer margins have widened to levels not seen since June and are likely near or setting a record for any August,” observed Fish.
Live cattle futures floundered last week, starting off with losses on Monday. There was a minor rally attempt on Tuesday, but then the rest of the week was consumed in losses. By Thursday’s settlement, the August contract had lost a net $1.47 with $107.95 and the October contract had lost a net $2.15 with $108.72.
The August live contract will settle finally and leave the board this Friday, making the December contract the “on-deck” contract behind October. Over the course of last week, the December contract lost about $1.50, settling Thursday at $112.97.
“[August live] is under extra pressure today as position come down draws near and August has lost to October all day,” noted Cassie Fish of the Beef Report on Thursday afternoon.
“Overall the market is bearing down on its lows made last week, though volume is still light and open interest has eroded all week to a new low for 2018. CME cattle futures trade defensively, but ‘lackluster’ rather than ‘dynamic’ is the fitting adjective.”
Feeder cattle
“Year-to-date receipts are up 7.7 percent as low water levels and lousy hay production are insistent factors motivating sales,” said Gottschalk of feeder cattle markets early last week.
“Any price gains for feeders should be limited seasonally, while calf prices should trend lower.”
The surveyed auction markets were mixed last week. Still, medium and large #1 steers were relatively plentiful with prices ranging from the $140s-170s, but with most prices in the upper-$150s.
Colorado: The Winter Livestock Auction of La Junta saw a lot of light calves right off of the cow due to the dry conditions and short grass availability. No trend was offered since the most recent sale was over a month ago. Trade and demand were called good. A couple dozen head of benchmark yearling steers sold narrowly between $157-158.
Kansas: The Winter Livestock Auction in Dodge City saw roughly steady sales volumes and too few comparable offerings to set a trend. The closest comparison was on 8-weight feeder steers and 6-weight feeder heifers, which were both steady to down $2. One 21-head lot of #1, 711-lb. yearling steers averaged $151.69.
Missouri: The Joplin Regional Stockyards sold 5,170 head of feeders last week with light heifer calves and mid-weight yearling steers selling steady to $3 higher. Other steers were steady, and heifer calves over 500 lbs. were up $2-6. Two large lots of benchmark yearling steers sold between $145-159.50.
Montana: The Northern Livestock Vdieo Auction sold over 57,000 head of feeder cattle during their Early Fall Preview Sale. Trade was called active on good demand, particularly for heavy calves and for value-added (non-hormone treated cattle), which dominated the market. Benchmark steers for October delivery ranged between $158-170.25; calves and value-added yearlings for November delivery brought between $157-170; and calves and value-added yearlings for December delivery brought $158.25-170.75. One lot of value-added yearlings for January delivery brought $159.75.
Nebraska: The Bassett Livestock Auction Market has not held a sale recently, so there was no test. Demand was called good on the 3,190 head that sold. A trio of benchmark yearling steer lots ranged from $155.50-176.25, including one described as “fancy.”
New Mexico: The Clovis Livestock Auction sold fewer cattle last week compared to the week before with steers selling $1-2 higher overall and 5-weights selling up $4. Light heifers were down $2-3, 5-weights were steady, and heifers over 700 lbs. were up $2. Two lots of benchmark yearling steers were reported, but at vastly different prices. The 65-head lot of 713-lb. steers averaged $152.50, while the six-head lot of 786-lb. steers averaged $140.83.
Oklahoma: The OKC-El Reno sale sold 8,311 head of feeders, up from the prior week that didn’t even see 6,000 head sell. However, feeders were mixed, with steers down $2 and heifers up $2. Calves were poorly tested. Benchmark steers ranged from $145-156.50, with a small, light calf lot setting the base.
South Dakota: Volumes were up slightly and prices were down noticeably at the Hub City Livestock Auction last week. The best test was on 9-weight feeder steers, which were down $3-4. Nonetheless, demand was called good to very good. The best demand was noted on light-fleshed cattle coming off of grass. Two lots of #1, 7-weight steers sold between $158.50-161.50.
Near-term feeder cattle futures did nothing but decline last week. The August contract lost about $2 over the course of the week, settling Thursday at $149.02 and the September contract lost about $2.50 with a $149.15 settlement.
“Nearby contracts seemed somewhat more attractive to buyers, probably thanks to breaking corn prices,” observed DTN’s John Harrington on Thursday afternoon.
“Note that the feeder index has reasserted a strong premium over the entire board, a premium probably fed by decent summer feeding profits and ideas of ample feed supplies through the feeding year ahead.” — Kerry Halladay, WLJ editor
