It was an odd market last week. Both the live cattle futures and the cutout values declined, but the cash fed cattle held relatively steady with the prior week’s slow sale to slightly up, and everything about the feeder market was up.
Little had happened in the cash fed cattle market by close of trade last Thursday, but it was more than the prior week had seen. Just over 10,700 head had been confirmed sold on the negotiated market at $105 live (steady with the prior week) and $165-168 dressed (up $2-3).
This was generally in keeping with early-week predictions from analysts.
“The negative basis has attitudes for sellers that ‘even with the board’ would be a good trade,” quipped Andrew Gottschalk of Hedgers Edge throughout the week.
The cash fed cattle prices did not rise to meet the futures prices, but the futures prices did come down to narrow the basis throughout last week. At settlement last Thursday, the October live cattle contract stood at $106.92, down a net 40 cents from the prior Friday’s close. The December contract shed a net $1.08 to settle at $111.77.
“I think the continued fund roll and the continued weakness in the hog market ganged up on the cattle market yesterday,” opined Troy Vetterkind of Vetterkind Cattle Brokerage last Wednesday morning.
“It probably shouldn’t fall out of bed as it feels like the cash fat cattle trade isn’t going to be any worse than steady this week. We’re still range bound in the cattle futures market as the market awaits confirmation of a late summer/early fall low in fat cattle and boxed beef markets.”
Those beef markets continued to edge slightly lower after a few weeks flirting with stability. The Choice cutout lost a net 88 cents over the course of the week to close Thursday’s market at $191, and the Select cutout lost $3.25 to close at $186.72. Oddly enough, the Choice price dipped below the Select price at one point in the week.
“This is not a sustainable relationship; end-users relying upon select product will move quickly to the higher grade for the same money,” Gottschalk accurately predicted.
Retail movement of beef saw a hit last week.
“That product markets are floundering is unexpected,” Gottschalk commented. “The devastation of the recent Hurricanes and storms would look to be the culprit.”
He added later that competition from other proteins is also a contributing factor.
Feeder cattle
The real excitement last week was in the feeder cattle markets. There was black and green ink to be seen in both the cash and futures feeders market. The fact that cash feeders has been and continues to be so strong was a point of confusion for Jim Robb, director of the Livestock Marketing Information Center.
“I am kind of surprised, given the kind of churning that we’ve had going in fed cattle, that we continue to hold this cash feeder cattle market up at these levels,” he commented to WLJ. “I’ve been saying it’s overpriced for three or four weeks now.”
Almost unanimously, the surveyed feeder cattle auctions saw increased prices for feeders. When it came to medium and large 1-class (#1) steers weighing 700-800 lbs., price range had obviously improved. Prices in the $140s-160s predominated, with lower prices only seen on calves or fleshy yearling lots.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City sold more cattle last week at higher prices. Feeders were up $3-6 with calves said to have a higher undertone. Prices on #1, 7-weight steers ranged from $150.60-159 on yearlings and from $146-148 on calves and fleshy yearlings.
Missouri: At the Joplin Regional Stockyards the sales volume doubled and prices went up. Steer calves were steady to up $4, heifer calves were up $3-6, and calves under 450 lbs. were up $5-10 regardless of sex. Yearling steers were up $2-4 and heifers were up $3-7. Two large groups of benchmark yearling steers sold between $148-160, and a half load of claves averaged $147.
Montana: Prices were up at the Miles City Livestock Commission even while sales volumes were steady. Steer calves were called up $5-10, while yearlings were steady to $4 higher. Heifers were too lightly tested for a trend. There were no #1, 7-weight steers, but the #1, 8-weight yearlings brought between $149.25-158.
Nebraska: Offerings declined but prices rose at the Ogallala Livestock Auction Market last week. Feeders were called steady to $6 higher on good demand. Two packages of benchmark yearling steers sold between $155-166.
New Mexico: Volume and prices were up at the Clovis Livestock Auction. Light feeder steers were up $3-5, while those over 600 lbs. were steady to $6 more. Heifers were called up $1-3, with instances of up $7 on 5-weights. The price split between benchmark yearlings and calves was quite noticeable. The two groups of yearlings averaged between $144-145, while the calves averaged just pennies above $129.
Oklahoma: A massive two-day sale of completely feeder cattle saw over 10,250 head sell at the OKC West-El Reno sale last week. Feeders were described as $3-5 higher and heifers were steady to firm. Calves were up $2-3 with the exception of reputation ranch calves which were “sharply higher.” Benchmark yearling steers sold between $150-159.80, while a small group of benchmark calves averaged $141.
South Dakota: Offerings came close to doubling at the Philip Livestock Auction. Prices were mixed. Light feeders were down $6-10, while mid- and heavyweight steers were steady to up $2. Heifers were all over the map; under 500 lbs. were up $2-10, light 5-weights were down $5, heavy 6-weights were steady, and over 800 lbs. they were up $3-6. Fourteen head of #1, 7-weight yearlings averaged 159.25.
Wyoming: Compared to the sale two weeks prior, last week’s Torrington Livestock Commission Co. sale saw higher prices on all cattle. Yearling steers were up $2-4 and yearling heifers were up $5-10. Too few calves sold for a comparison. A group of 40 #1 yearling steers weighing 710 lbs. averaged $160.
In contrast to live cattle futures, feeder cattle futures gained last week. The September contract gained a net 93 cents over the course of the week to settle last Thursday at $148.80. Given current cash price averages, the contract is running at a discount to cash. The October contract gained a net $1.18 to settle at $149.60. — Kerry Halladay, WLJ editor
