Fed cattle markets were slowly trending up last week due to continuing winter marketing conditions.
By close of trade Thursday, Feb. 21, it appeared we were in for another Friday afternoon buying binge by packers. Cattle feeders were starting out the week asking for $128 live and $203 dressed. The prior week’s market saw trade at $124 and $199, respectively.
Futures markets were trending higher for most of the week then broke a bit on Thursday, trying to give feeders a sell signal. As of press time, USDA’s five-area weighted average reported 2,430 head of negotiated cash fed cattle had traded for the entire week at $125 live. Typically, late week trade has benefited the producer.
Cassi Fish at Consolidated Beef Producers pointed out, “The slow tempo of the futures market leaves traders almost too much time to ponder what they know, and impatient to find out what they don’t know. It is what they don’t know that haunts them because it is impossible today to determine exactly when the cattle market will top this spring—and where.
“The bears are convinced the market can’t exceed last year’s $130 high and that packers will maintain their grip on leverage. Others know that numbers will tighten in the north at the same time weights seasonally decline, making the case of a more typical seasonal spring high of late March or early April likely. Just look at the long-term cash averages for evidence.
“So much of how high the market gets this spring centers on the impact of weather on cattle in the north. The current string of storms pounding the north will only exacerbate declining feedyard performance in terms of weight gain and cost. A bout with more mud in March this year will be inescapable due to the additional heavy snowfall. March is typically the worst close-outs of any year anyway. Point is, it will be April before pens begin to solidly improve in the north. Weights don’t bottom seasonally until May any year. So even though January weights saw a 2-pound week-over-week recovery, according to the USDA report yesterday pegging steer weights at 888 pounds, it will be three more months before the industry knows where weights will ultimately end up.”
Packers have been processing between 590,000-610,000 head a week for the past few weeks. They are trying to keep the beef cutout prices at profitable levels. The latest packer margin index showed packers earning $51 per head.
The Choice cutout is fairly steady trading in the $117 range and Select beef is just $5 lower. Beef production is down 1.2 percent so far this year. This could be attributed to the colder, wetter winter weather. However, weather hasn’t affected beef quality; 81.5 percent of all beef graded Choice or Prime in the Feb. 8 report.
USDA is starting to catch up on their statistics and reported carcass weights for Jan. 5, 2019. Average carcass weights were down 11 pounds from a year ago, which resulted in weekly beef production decreasing 1.3 percent.
The Ag Center’s cattle report said last Thursday, “Sometimes weather events turn into more than a short-term happening and this winter is approaching that category. Smaller show lists this week combined with a pared down slaughter once again will leave a shortfall in beef production with only uncertainty about beef demand.
“African swine fever continues in the background as a threat to both pork production and pork demand, having important implications for beef demand. The origin of trouble is China and the news is always tempered by censorship and the real impact unknown. Additional cases have been reported in the EU and now Canada.”
Feeder cattle futures have been in a steady decline with the March contract at $143.22. Cash prices appear to be much stronger as most auction markets have reported lightweight steers trading $6-10 higher and the heaver feeders down $1.50. The latest CME feeder cattle index was at $141.10.
The slaughter cow market may be the bright spot in the cattle markets with most markets reporting a solid $5 increase. Fleshy cows were trading at $56 in Washington. The weather is also affecting feeder and cow markets; muddy roads and shipping conditions are poor.
Cattlemen are getting a case of grass fever. The southern tier of the U.S. has been getting good moisture, the Arizona desert country is fabulous right now and stocker cattle are being turned out. — Pete Crow, WLJ publisher
