It was a manic market last week. While most elements seemed determinedly down, a sudden jump on March 14 gave us the one of the highest cash cattle prices seen this year. The following day, Choice cattle came within a penny of the long-stated resistance level after several days of decline.
March 14 saw about 54,200 head of negotiated cash fed cattle confirmed sold for the week. Prices were $126-131 live (average $129.46) and $204-207 dressed ($206.51).
“The high for the year thus far was the second week of February at $130,” noted Cassie Fish of the Beef Report. She also pointed out however that supplies of market-ready cattle are both tighter now than they were then, and tighter this year than they were last.
“Market-ready supplies are excruciatingly tight. Packers have plant clean-ups scheduled for this and next week as they are aware of the circumstances more than the cattle feeder. This industry may go from famine to feast in record time—March to May—but there is no easy way to get from here to there for a packer.”
By close of trade Thursday, the volume of cash cattle sold rose to almost 82,600 head, but prices fell to averages of $128.24 live and $205.46 dressed. Bearish expectations are for steady to higher cash cattle for the week of March 19-23.
“The transition into calf-feds is establishing a two-tier price structure near term,” cautioned Andrew Gottschalk of Hedgers Edge. He also noted that the cash cattle market is getting regionally divided because of where the market-ready cattle are.
“Most in the industry are of the opinion that once we get into the middle/end of April there will be plenty of fed cattle available to the market,” commented Troy Vetterkind of Vetterkind Cattle Brokerage. “But in the immediate near-term, numbers are tight and the higher cash market is reflecting this.”
The expectation of “the wall” in late April has been a problem point for the April live cattle futures contract.
“Some know, others don’t, and some choose to forget, but because of the severe limitations of physical delivery, delivery against the [April live contract] can continue until May 15,” Fish pointed out, adding that many traders remember when the contract expired on or near April 20.
“Physical cattle delivery is not sustainable long-term. The market already knows this. Sooner or later this industry will be forced to accept this fact and update this contract. Or should we rename the contract May LC?”
Over the course of the week (March 9-15), the April live cattle contract lost a net $1.27 with a settle of $121.85. Similarly, the June contract lost $2 with a $112.30 settle.
“Try as they might cattle futures simply can’t get up through tough overhead resistance at $124 in April live and $116 in June live,” commented Vetterkind. “Even with the market being deeply oversold and cash coming in $1-2 higher this week, the futures still couldn’t stick a close above this important level of resistance… So either someone is making a big mistake keeping this market suppressed or it’s going a lot lower; $120 will serve as important near-term support for April live cattle as will $112 in June.”
If nothing else, demand is holding up surprisingly well despite seasonal weakness.
“An early Easter, accompanied by decent retail beef margins, may allow April demand to show some improvement over recent years,” noted Gottschalk. “Demand factors domestically and worldwide remain very positive. Employment and wage growth is accelerating. These conditions should limit both the magnitude and the duration of the expected price decline into the summer.”
As mentioned, the Choice beef cutout came within striking distance of passing the near-term resistance level of $125. On Thursday’s close of trade, the Choice cutout stood at $224.99. The Select cutout closed at $216.31.
Feeder cattle
The gains in cash fed cattle and cash beef did not translate to gains in the cash feeder world. Most feeder cattle auctions saw declines in prices as volumes increased. The medium and large 1-class (#1) steers weighing 700-800 lbs. were unanimously yearlings.
California: The Cattlemen’s Livestock Market of Galt had a steady if small sale last week. Feeder cattle of all classes were steady. There were still no #1, 7-weight steers, but the #1, 6-weight steers brought $145-163.
Colorado: The Winter Livestock auction of La Junta more than doubled its sale volume last week compared to the week before. Light steers were steady to up $2 with instances of up $6-10 on fancy, thin-fleshed lots. Steers 700 lbs. and up were down $1-4. Light heifers were up $3 with instances of up $8 on fancy 5-weights. Heavier heifers were down $3-5. Benchmark steers ranged from $141-152.
Kansas: There were more cattle sold at the Winter Livestock Feeder Cattle Auction of Dodge City last week than the week before. Feeder steers were down $3-5 and heifers were down $3-6. Calves of both sexes were firm to up $6. Several large lots of #1, 7-weight yearling steers ranged from $140-156.75 with most averages in the low $150s.
Missouri: Offering numbers were steady at the Joplin Regional Stockyards, but feeder prices were mixed. Light feeders were steady to up $3, while heavier feeders were the reverse. The offering was said to be mostly weaned calves and yearlings. Benchmark steers ranged from $141-155.75, with averages in the high $140s.
Montana: Feeders were too lightly traded at the Public Auction Yards for a market test, but market activity was called slow. All told, 14 head of #1, 7-weight steers ranged from $138-146.50.
Nebraska: Over a 1,000 more head of cattle sold last week at the Huss Platte Valley Auction. Heavy steers were down $3-7 and heavy heifers were down $2-4. No trend on feeders under 750 lbs. due to light trade. Two large lots of benchmark yearling steers sold; the 98-head group averaging 709 lbs. brought an average of $163.12 and the 357-head group averaging 775 lbs. brought $148.78.
New Mexico: Volumes were relatively steady at the Clovis Livestock Auction but prices on feeders were mixed; up and down $3 with preference for heifers. Two large groups of #1, 7-weight yearling steers ranged from $141.50-148.50.
Oklahoma: The El Reno auction sold a whopping 13,159 head of feeder cattle last week, but prices were unanimously lower; down $3-5 on most steers, down $5-8 on steers over 800 lbs., and down $4-6 on heifers. Several large lots of benchmark yearling steers sold, but prices ranged wildly with little overlap between the groups. The low of $129 was set by a small group of fleshy yearlings, and the high of $159 was set by a large lot of fancy yearlings.
Wyoming: The volumes were mostly steady at the Torrington Livestock Commission, but prices were uneven. Steer calves over 500 lbs. were steady to up $5-8 while yearling steers were down $3-4. Heifer calves were down $2-8 and yearlings were down $2-4. Two large lots of yearling benchmark steers sold between $150-160.
The feeder cattle futures also lost ground last week, with near-term contracts down about $2 from the March 9 settlement. By Thursday, the March contract settled at $140.62 while the April contract was little better at $140.82.
“The breakdown of the feeder futures now moves the near-term trading range down to $139-140 as support and $145-146 as resistance basis April and May feeder cattle,” opined Vetterkind. “I would trade the above-mentioned ranges for now.” — Kerry Halladay, WLJ editor
