The bottom has definitely been put in the cutout markets for the season. Last week saw the Choice cutout surge over $8 in four days. This seemed to lift the spirits of the other areas of the market, with cash cattle—live and feeder—and near-term futures all up.
“We’ve arrived,” declared Cassie Fish of the Beef Report on Thursday.
“Cutout values will advance sharply in May to the mid-$230s or higher, especially if the seasonal demand expansion outpaces the ramp-up in beef production.”
“Economic data remains positive with employment and wages rising simultaneously,” Andrew Gottschalk of Hedgers Edge added, also on Thursday. “We maintain that wage growth is understated. You can believe the news or your lying eyes—your choice. Help wanted signs are in most storefronts.”
By close of trade on April 26, the Choice cutout closed at $220.08, up $8.10 from April 20’s close. The Select cutout gained about $4 over the course of the week, closing Thursday at $204.48.
Despite some shaky sales earlier in the week, by Thursday, almost 16,500 head of negotiated cash fed cattle had been confirmed sold. Thursday’s prices ranged from $118-125 (average $122.90) live and $193-195 ($193.68) dressed.
The volume of negotiated cash fed sales was very light by Thursday. Recent weeks have seen 80,000-130,000-head sales. With expectations of this week’s total cattle slaughter being 630,000-650,000 head, it is likely that weekly negotiated sales volumes will pick up.
Fish pointed out that the near-term contracts are prepared for the worst, focusing only on the specter of the wall of cattle—supposedly due this week—instead of strong fundamentals of packer profitability and consumer demand indicators.
She pointed to the record-setting spread between the soon-to-expire April live futures contract and June contract. On Thursday, the two closed at $122.52 and $104.35 respectively, a spread of roughly $18.
“Obviously, the record wide spread is reflecting the widely anticipated increase in fed cattle marketings in Q2 and the fear associated with that supply increase. Bears are convinced whenever the wall of cattle arrive, packers will take prices down by the handful. No matter that demand peaks in May/June. Nor that packers are highly profitable and intend to kill more cattle and retailers, also profitable, will ramp up features.”
As of April 26, packer margins were estimated at $83/head and the Choice price target was pegged at $225.
Feeder cattle
Across the surveyed feeder cattle auctions, prices on feeders were steady to up, with some markets and feeder classes seeing a $12 advance on the previous week. Prices on medium and large 1-class (#1) steers weighing between 700-800 lbs. saw averages up in the upper $140s and $150s.
California: There weren’t many cattle sold at the Cattlemen’s Livestock Market in Galt, but what did sell were up $3-5. Benchmark steers traded between $125-145.
Colorado: The Winter Livestock auction sold 1,733 head last week with feeder steers trading $3-8 higher, with instances of $10 higher on 5-weights. Heifer calves were up $5-8 and yearling heifers were up $1-2. One lot of 79 head of #1, 730-lb. yearling steers averaged $150.05.
Iowa: The Bloomfield Auction sold feeders over 600 lbs. steady to up $10 compared to the April 11 sale. Trade was called active on good demand. Benchmark steers ranged from $152-162.50.
Kansas: The Winter Livestock Auction sold more cattle last week than the week before, with prices on midweight steers up $5-10. On heavy steers and heifers, prices were steady to up $3. The several lots of benchmark yearling steers ranged from $138.50-154.25.
Missouri: Almost 6,700 head of feeder cattle sold at the Joplin Regional Stockyards last week. Calves and yearling steers were called steady while yearling heifers were down $4. Three lots of benchmark steers sold; the yearling lots ranged from $134-150, and the calf lot averaged $138.
Montana: The Miles City Livestock Commission sold over three times the number of cattle last week compared to the week before. Feeders were too lightly tested for an accurate market trend, but the sale noted that there were higher undertones and moderate demand, particularly for backgrounded cattle. Two lots of benchmark yearling steers averaged $153.29 for the 740-lb. lot, and $144.38 for the 772-lb. lot.
Nebraska: Feeders were steady to higher last week at the Bassett Livestock Auction Market. Six-weight feeders sold steady while 7-weight steers were up $8 and heifers were up $10. Demand was called good. Several lots of #1, 7-weight yearling steers were offered, ranging from $149.50-169.
New Mexico: The Clovis Livestock Auction sold fewer cattle last week than the week before. Feeders were called mostly steady on moderate to good demand and trade activity. A trio of benchmark lots sold between $135-145.50.
Oklahoma: Feeders sold up $2-5 at the OKC West-El Reno sale last week. Calves were lightly tested but mostly steady with a higher undertone on better-quality calves, particularly heifers. Many lots of #1, 7-weight steers sold, several of them fairly large, at $139.75-154.
South Dakota: Last week’s sale volume was over four times larger than the week before. There were too few comparable sales for a market trend, however higher undertones were noted on most classes of feeders. Three large lots of #1, 7-weight yearling steers sold between $145-164.50.
Wyoming: The Torrington Livestock Commission sold steer calves unevenly steady to $8 higher. Yearling steers were up $5-10. Heifer calves were up $4-6 with instances of up $12. Yearling heifers ranged from steady to up $6. Benchmark steers saw prices between $152-166.
Over the course of the week, the April feeder cattle futures gained about $3, settling April 26 at $140.17. The May contract gained about $1 at $140.30.
Troy Vetterkind of Vetterkind Cattle Brokerage opined that the feeder futures market needs to make it to $142 in the May contract “in order to get some fireworks to the topside.” — Kerry Halladay, WLJ editor
