The recent cattle markets are inviting the creation of a new aphorism. Instead of saying “As slow as molasses in January,” we could all start saying, “As slow as cattle sales in the cold.” The winter weather seems to be affecting everything.
The markets seem content with the reestablished pattern of putting cash fed cattle trade off until late Friday afternoon. By press time, only 2,840 head of negotiated cash fed cattle had been confirmed sold for the entire week with no price trends established. Expectations were for steady to higher prices compared to the prior week’s averages of $126.93 live and $201.65 dressed.
Near-term live cattle futures were up about $1 last week, with Thursday’s settlements being $129.95 for February and $129.85 for April. Thursday was the February contract’s final settlement, making the June live contract the next “on-deck” contract. It gained a little under $1 with a Thursday settlement of $120.15.
“The seven-year average cash basis during March for W. KS. is +$3.31/cwt. This year (per yesterday’s futures and last week’s cash) we are MINUS -$3.40/cwt,” explained Andrew Gottschalk of Hedgers Edge on Thursday, speaking of recent market history.
“The most recent year to record a negative basis during March is 2016, at minus $0.85/cwt. A negative basis is often associated with increased front-end fed cattle supplies. Numerically, this is the situation this year. However, as previously stated, adverse feeding conditions have neutralized the front-end fed cattle supplies near term.”
Cassie Fish of the Beef Report also had comments on the cold where cattle conditions are concerned.
“Ask anyone who has weighed up fat cattle to ship this week and you will find that in general, cattle are 70 to 100 pounds below projection. Carcass weight data will show a more rapid decline as the spring progresses. Brutally cold temperatures until mid-March will impact consumption and weight gain.”
On the consumption side, Gottschalk noted that colder temperatures mean higher heating costs for consumers, which mean less disposable income for beef.
“Sharply higher energy costs will continue to be a drag on consumers’ spending,” he summarized. “The extended AccuWeather forecast for March leaves little room for optimism regarding any relief from the cold and resulting high energy bills. Aside from the winter heating bills, economic data remains positive. Of particular note, income growth is increasing the fastest in the lower income bracket. This is demand positive.”
Beef prices not only held onto their gains from the week before, but last week saw them grow. Over the course of the week, the Choice cutout gained a net 56 cents to close Thursday at $219.95. The Select cutout gained $2.92 over the week to close at $215.27.
Feeder cattle
Feeder cattle markets continue to be buffeted by harsh weather. Prices were mixed but mostly steady across the board in the surveyed auctions. Demand, where noted, was usually very good.
Medium and large #1 steers weighing between 700-800 lbs. were generally averaging in the $140s, with prices ranging from the low-$130s to the low-$160s.
Colorado: Sales volume at the Winter Livestock sale in La Junta was mostly steady. Prices on feeder cattle were mostly steady to $2 lower with the exception of 6-weight heifers, which were steady to up $2. Three lots of #1, 7-weight steers sold between $136.50-150.
Kansas: The Winter Livestock Auction sold fewer feeders last week than they did the week before. Prices were mixed steady to up and down $2-3 with preference for heifers. The two lots of benchmark steers sold between $139.25-143.
Missouri: Sales volumes were up and prices were mixed at the Joplin Regional Stockyards. Feeders were mostly steady, with steady to up $3 on 4-6-weights, and heifers over 600 lbs. steady to down $2. Demand was best for grazing-quality calves. Two large lots of #1, 7-weight yearling steers averaged in the low $140s.
Nebraska: There haven’t been many sales at the Bassett Livestock Auction Market lately, so there were no market trends on feeders. Demand was called very good both in the seats and online. Two large lots of standard benchmark yearlings sold between $141.25-157, and a 73-head lot of 780-lb. #1 value-added yearlings averaged $160.
New Mexico: Over 1,000 more cattle sold at the Clovis Livestock Auction last week compared to the week before. Calves under 600 lbs. were mostly up $2-4. Heavier feeders were steady to down $1. Prices on benchmark yearling steers ranged from $130.50-144.
Oklahoma: The OKC West-El Reno sale more than doubled its most recent sale volume last week at over 14,000 head. Feeder steers were steady while feeder heifers were down $2-3. Steer calves were steady to up $5 and heifer calves were up $5-8. Demand was called good to very good, especially for cattle that could be turned out onto wheat pasture. The offering of #1 cattle skewed very heavy. Seven-weights were in the middle of the weight pack and sold between $134-147.50.
South Dakota: The Hub City Livestock Auction sold about 500 fewer cattle last week, and prices were mixed steady up and down $5 for feeders with preferences for heavy heifers and discounts on mid-weight steers. Prices on most benchmark yearling steers ranged from $130-152.75, with a small lot of heavy “fleshy” yearlings averaging $128.72.
Wyoming: The Torrington Livestock Commission Co. sold steer calves and yearling steers “sharply lower” with some instances of down $8-15 on steer calves under 500 lbs. Midweight steer calves were steady to $3 higher. Heifer calves were down $3-4 while yearlings were unevenly steady. Two lots of #1, 7-weight yearling steers averaged between $146-147.
Over the course of the week, the near-term feeder futures were mixed with some net gains. However, this was in spite of some triple-digit losses on Thursday attributed to “active liquidation.”
“The concern that April contracts will move through initial support levels of $145.30 through the end of the week has caused active liquidation. This has sparked underlying pressure in live cattle markets with April futures firmly lower,” commented DTN’s Rick Kment.
“Triple-digit losses have continued to hold across feeder cattle trade. Although prices have bounced off of session lows, the underlying weaker tone in the market on the last trading day of February is causing some concern that nearby contracts may be unable to hold support levels set last week.”
By Thursday’s settlement, the March contract stood at $142.88, down 2 cents from the Friday, Feb. 22 settlement. The April contract settled at $146.15, up 85 cents. Both contracts lost over $1 on Thursday. — Kerry Halladay, WLJ editor
