The cattle markets had a disappointing close on Thursday ahead of Labor Day weekend. Futures were unable to scale any higher, cash trade was disappointing and wholesale beef prices headed lower.
The now-near October live cattle contract lost over $3.50 over the week to close at $126.05, and the December contract also lost nearly $3.50 to close at $132.20.
“So what’s going on here?” asked Cassie Fish, market analyst, in The Beef. “Is the cattle market in trouble?” She explained it is “widely known” fed cattle supplies in the fourth and first quarter will tighten noticeably for the first time in years, and cattle futures have carried a hefty premium to cash prices for months.
“At the same time, cattle feeders have struggled mightily to regain any leverage, and packer margins have expanded to the widest level in 2021, over $1,000 per head net. Is the futures market beginning to question just how much cattle prices can advance by year’s end, let alone by October 31?”
Cash fed cattle trade was slow to develop throughout the week, totaling only 43,000 head after mid-week. Prices averaged anywhere from $123-127.50 but sold mostly around the $124-125 mark. Total negotiated cash trade through Aug. 29 was a disappointing 57,120 head. Live steers averaged $125.86, and dressed steers averaged $204.56.
The Fed Cattle Exchange sold 5,029 head at their weekly online sale Wednesday. A total of 1,590 head actually sold between $122-124.50, all from Texas.
The National Weekly Direct Beef Type Price Distribution report was released for the week ending Aug. 30. The report showed the average live basis distribution as:
• Negotiated purchases: $125.54.
• Formula net purchases: $125.69.
• Formula contract net purchases: $125.08.
• Negotiated grid net purchases: $124.34.
For dressed purchases:
• Negotiated purchases: $204.38.
• Formula net purchases: $199.42.
• Formula contract net purchases: $189.72.
• Negotiated grid net purchases: $199.55.
Through Thursday, slaughter was estimated at 476,000 head, about 13,000 head higher than the same time a week earlier. With the Labor Day holiday closing out the week, packers tried to get ahead of the shortened work week. Slaughter for the last full week of August is projected at 651,000 head. USDA reported actual slaughter for the week ending Aug. 21, which totaled 666,423 head.
Boxed beef prices continued their decline ahead of the holiday weekend—from here on out, boxed beef prices should continue to level out until the next big holiday. On Thursday, the Choice cutout closed at $337.92—down about $9 week over week—and the Select cutout closed at $304.97—about $15 down over the week.
Feeder cattle
Feeders nosedived into the red Thursday afternoon, with futures contracts losing $2-3 each. The September contract ultimately lost over $4 over the week, closing at $160.30. The October contract lost about $3 to close at $165.05. The CME Feeder Cattle Index lost about 85 cents over the week to close at $157.94.
“This could not only lead to pressure through the end of the week, but also a significant shift in trade direction during early September based on eroding technical support,” remarked Rick Kment, DTN contributing analyst, in his Thursday midday comments.
“With feeder cattle sales expected to increase even more over the next several weeks, traders are focusing on the potential that price levels may be under more pressure based on seasonal supply levels,” Kment said.
Kansas: Winter Livestock in Dodge City sold 1,615 head Wednesday. Compared to a week earlier, feeder steers 800-1,000 lbs. sold $3-4 lower, and steers 700-800 lbs. sold $3-4 higher. Steer calves 350-700 lbs. sold $5-6 lower. Feeder heifers 400-1,000 lbs. sold unevenly steady to $3 lower. Benchmark steers averaging 776 lbs. sold for $159-160.
Missouri: Joplin Regional Stockyards in Carthage sold 4,916 head Monday. Compared to the previous week, feeder steers traded steady to $4 higher, and feeder heifers traded steady to $3 higher. Benchmark steers averaging 769 lbs. sold between $142-158.50 and averaged $152.74.
New Mexico: Roswell Livestock in Roswell sold 805 head on Monday. Compared to the previous auction, steer calves and feeders sold $2-4 higher on limited receipts. Heifer calves under 600 lbs. were $5 higher. A small group of steers averaging 523 lbs. sold between $187-196, averaging $191.99.
Oklahoma: Oklahoma National Stockyards in Oklahoma City sold 7,187 head Monday. Compared to the previous sale, feeder steers and heifers sold unevenly steady. Steer calves sold $5-8 higher, and heifer calves sold unevenly steady. Benchmark steers averaging 775 lbs. sold between $150.50-162.25 and averaged $159.57.
South Dakota: Sioux Falls Regional Cattle Auction in Worthing sold 1,764 head Monday. Compared to the previous week, feeders sold unevenly steady; most weights were hard to make a meaningful comparison. Steers 800-900 lbs. sold $2-4 higher, and heifers 800-850 lbs. sold $3-5 higher. Benchmark steers averaging 769 lbs. sold between $160-169 and averaged $165.19. — Anna Miller, WLJ managing editor
