Fed cattle trade was once again slow to develop last week, even after the U.S.-Mexico-Canada trade deal was announced. Early trades had fed cattle priced at $109.85. Mid-week packers were offering $108 and feeders were pricing cattle at $114. Futures markets weren’t offering any direction, trading mostly flat for the week. October live cattle contract was at $113.62 and December was trading at $118.37.
The closing report on Thursday showed that only 17,302 head had traded on the cash market at $111 live and $175 dressed. Most trade occurred in the Corn Belt, where they are expecting some serious moisture in the middle of harvest. Southern Plains feeders are holding out a bit harder. Packers offered $109 and feeders are sticking to $114. Unfortunately, packers continue to have the leverage. There are still lots of ready cattle to be processed. This negative basis we are now in makes it more difficult on cattle feeders.
Cattle feeders have their eye on the deferred months. Andy Gottschalk at HedgersEdge said that “The premium futures structure will continue to push cattle toward the higher-priced, premium months as producers await a narrowing in the basis. This will become increasingly evident during November, given the premium in December versus October futures.”
Packers processed 650,000 head the week prior and were expected to ramp down a bit to 640,000 last week to stabilize the cutout values. Choice is currently trading at $203.82 and Select is at $191.74, which is softer than when we started the week. Analysts are saying that beef prices should be bottoming out. Also, hide and offal values have fallen to $9.14. However, packers are still earning $148.95 per head.
Cassie Fish of The Beef report noted, “The expansion of the U.S. beef cow herd has and will continue to result in ample supplies of cattle on feed for many months to come. But the key to success was the industry maintained currentness during what could have been a bottleneck of supply and has now arrived at the final quarter of 2018 in better shape than many predicted—as measured by carcass weights, slaughter levels and prices themselves. There is good reason for modest optimism this fall and winter as supplies ebb back to even with a year ago.
“Heavy placements of lightweight cattle the last three months won’t hit this timeframe, making the 6 percent more cattle on feed than a year ago somewhat misleading. But the significant number of cattle in the feedyard overall will likely keep cattle feeders selling cattle aggressively and the market, a wall-of-worry climber for months to come.”
Feeder cattle
Feeder cattle markets have remained strong, grain is cheap, and prospects of good wheat grazing has put a fire underneath the light calves. Many light calves sold on the Superior sale last Thursday for over $200 cwt. However, the corn market did gain a little ground, which may have been the reaction to the new trade deal with Mexico and Canada.
The seasonal trend for feeder cattle is to start showing up in big numbers at the auction markets, which typically put downward pressure on feeder cattle prices. Cattle feeders are the eternal optimists and have kept buying cattle aggressively all summer, even though they have been losing money for the past five months.
Gottschalk said, “September placements will be challenged to exceed prior years levels, given the increased placements during the July-August period, the feeder calf supply outside feedyards is below the prior year by approximately 70,000 head. Competition for this supply will be intense, as good-to-excellent wheat pasture in the South Plains will in turn compete with cheap feed grains. This should serve to limit seasonal weakness in the feeder and calf complex.”
Colorado
The Winter Livestock auction of La Junta reported 2,537 head sold. Lightweight steer calves were $3-5 higher, while 700-lb. yearling steers were lightly tested and $2 lower.
Montana
Public Auction Yards in Billings reported 1,109 head offered. They called the market too light to be adequately tested, yet reported good demand on lightweight steers, which were trading up well over $2.
Wyoming
Torrington Livestock Commission reported 2,739 head sold, with calves trading steady to $3 higher and yearlings trading up $2-4. Benchmark steers were trading at $162.
Oklahoma
OKC West-El Reno reported 11,008 head offered with feeder steers $2-3 higher and heifers $4-8 higher. Steers weighing 700-800 pounds ranged from $161.50-166.50, with 5-weight steer calves trading at $158-169.
New Mexico
Roswell Livestock Auction reported 1,847 head offered and reported steer and heifer calves $2 higher on a weak test. Benchmark steers traded between $139-141.
South Dakota
Hub City Livestock in Aberdeen reported 4,695 head offered. They reported strong demand on yearlings, which were $3-5 higher, Benchmark steers traded at $164.14 and same-weight heifers sold for $152.54.
Nebraska
Bassett Livestock Market offered 2,270 head and saw heavy yearling steers $4-5 higher and benchmark steers averaging $168.31, with same-weight heifers at $156.03.
California
Turlock Livestock offered 3,562 head and saw a much-improved market from prior weeks. One load of 765-lb. steers brought $153.75 and same-weight heifers were trading at $139 with lightweight steers trading as high as $199 cwt. — Pete Crow, WLJ publisher
