The markets played out last week like a Shyamalan suspense thriller; we were left in the dark most of the week and then there was an unfortunate twist at the end.
It was the negotiated cash fed market that left the industry in the dark—again. Not even 2,500 head of cattle confirmed sold for the week by close of trade on Thursday. The little packages here and there of cattle that sold throughout the week were mixed steer and heifer lots that brought between $123-124 live and $198 dressed.
Given the low volume and the nasty reversal in the futures on Thursday—the unfortunate twist ending—it is highly unlikely these negotiated cash prices were at all representative of the eventual cash cattle trade. Analysts had expected prices would be higher than the prior week’s $121 live and $193.25 dressed level, but it is likely the late-week crash worked out in packers’ favor.
After spending most of the week steadily gaining value, and even eclipsing the recent seasonal high set at the beginning of the month, live cattle futures crashed on Thursday, trading almost limit down.
“Bullish momentum was the rule of the day for most of the session with nearbys setting more multi-months highs,” DTN Livestock Analyst John Harrington commented Thursday afternoon.
“But such confidence really came unglued late in the day when aggressive long liquidation and profit-taking caused prices to abruptly reverse and close sharply lower.”
By settlement on Thursday, the February contract stood at $122.47. This was up a net 57 cents from the Jan. 19 settlement, but down $2.95 from the intra-week high. The April contract settled Thursday at $122.60, down a net 13 cents from the Jan. 19 close, and down $2.55 from the intra-week high. All of those losses came during Thursday’s trade.
The beef cutouts spent the week regaining the ground it lost during the Jan. 12-19 week. Over the course of the week, the Choice cutout gained about $2 to $206.77 on Thursday’s close. The Select cutout gained about $1 over the course of the week to close Thursday at $201.32.
“Initial resistance is $210 for Choice beef; support is $198-$200,” commented Andrew Gottschalk of Hedgers Edge. He additionally noted that the projected declines in weekly cattle kills will help keep the cutouts propped up.
“Production last week was estimated at 615,000 head,” he said last Monday, speaking of the Jan. 12-19 week. “Production this week will be challenged to exceed 605,000, given weather-reduced slaughter levels at the beginning of this week.”
Given the pressured cutout prices, packer margins have been declining, though not as quickly last week as in the week before. On Thursday, the estimate for packer margins was $24/head.
Feeder cattle
Demand for feeder cattle seems to have rebounded quickly following the winter storm that tore through the Midwest and the Central Plains. Most of the surveyed cattle auctions reported larger trade volumes, higher prices, and strong demand from buyers.
Medium and large, 1-class (#1) steers weighing between 700-800 lbs. were trending in the upper-$140s to lower-$160s.
Colorado: The Winter Livestock auction of La Junta sold about half the volume of cattle last week as it did the week before. Light feeder steers were called steady to $3 lower while those over 650 lbs. were up $2-3 with the exception of 7-weights, which were up $7-8. Light heifers were steady to up $3, while those over 650 lbs. were up $3-5. Demand was called good on the large feeder offering. Benchmark steers ranged from $146-158.
Iowa: Over 2,200 head of cattle sold at the Bloomfield Feeder Cattle sale last week, but there was no comparison since there has been no sale for the prior three weeks. Trade was called active on good demand. Number 1, 7-weight yearling steers sold from $142.25-162.25.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City sold three times the volume of cattle last week as the prior sale. Midweight steers were called steady to firm, with heavy steers said to have a higher undertone noted. Heifers were steady to $3 higher. Calves were said to have a firm to higher undertone noted on a light test of comparable sales. Yearling benchmark steers ranged from $145-153.
Missouri: Almost 9,000 head of feeder cattle sold at the Joplin Regional Stockyards last week, well over three times the volume that sold the week before. Steers under 700 lbs. and heifers under 600 lbs. were up $3-7. Heavier steers were unevenly steady to up $5, while heavier heifers were steady to up $2. Demand was called good on the heavy offering of feeders. Benchmark yearling steers ranged from $138-152.50, while calves ranged from $137-139.
Montana: The sales volume at the Miles City Livestock Commission doubled last week, up to 1,636 head. There was no trend available, given the lack of comparable sales. Demand for feeder cattle was said to be mostly good with most demand going to load lots or near loads of calves. Heifers were called better quality than steers. Two groups of #1, 7-weight steer calves sold, with the 715-lb. group averaging $155.85, and the 760-lb. group averaging $149.
Nebraska: Volumes and prices were up at the Huss Platte Valley Auction last week. Steers under 800 lbs. sold up $4-7, with heavier steers selling steady. Heifers were called unevenly steady. The sale report noted that many feedlots had cleaned up fairly well after the blizzard and sent buy orders in. Light steers were headed towards summer grass plans. Several large groups of yearling benchmark steers ranged from $145-163. One group of 16 head of 724-lb. calves averaged $130.50.
New Mexico: Sale volumes actually declined last week at the Roswell Livestock Auction, but prices were up a lot. Feeder steers were up $2-7, except for 5-weight steers which were up $15. Heifers under 600 lbs. were up $3-6, and heavier heifers saw instances of up $15 as well. Trade was called very active on very good demand. Two groups of #1, 7-weight yearling steers sold; the 729-lb. group averaged $144.59 and the 773-lb. group averaged $131.87.
Oklahoma: Almost 13,500 head of feeders sold at the OKC West-El Reno sale last week. Prices were described as steady to firm on yearling steers, with the exception of 8-weights which were down $1. Heifers were up $2-4. Calves were up $4-7 with preference going for heifer calves. Demand was called good and very good on weaned calves. Quality was called average to attractive. A large number of benchmark steer lots were offered, ranging from $140-157, inclusive of calves. The largest lots—675 head and 473 head—fetched the highest averages at $150.35 and $153 respectively.
South Dakota: The Philip Livestock Auction sold almost 7,500 head of cattle last week. Feeder steers were up $2-4, while heifers ranged more widely from steady to up $6. There was very good demand for load lots and long strings. Two especially large lots of benchmark steers—984 head and 541 head—achieved great averages at $151.58 and $156.78 respectively. Another lot of fleshy yearlings averaged $146.50.
Texas: Volumes were down at the Amarillo Livestock Auction but prices were up. Feeders sold up $4-8 and trade was active on very good demand. Many loads of steers were said to be attractive. Only one 19-head lot of #1, 714-lb. yearling steers sold, averaging $152.06.
Utah: Both the Producers Livestock Auction of Salina and the Livestock Connection of Monroe sold fewer cattle last week, but with higher prices on feeder steers and heifers. Prices on benchmark steers at the Producers Livestock Auction ranged from $130-156, while at the Livestock Connection they were $138-151.
Wyoming: The Riverton Livestock Auction more than doubled its sale volume last week compared to the prior sale. Feeder calves were called up $4-8 with instances of up $10-12 on light 7-weight steer calves, and instances of $5 lower on heavy 6-weights. Heifers were called under pressure with instances of $3-6 lower. Demand was called moderate to good. Two large lots of #1, 7-weight steer calves averaged $154.43 for the 714-lb. group and $144.15 for the 786-lb. group.
Feeder cattle futures followed the live cattle futures downwards on Thursday with triple-digit losses almost across the board. The only contract spared was the expiring January feeder contract, which lost only 60 cents in Thursday’s crash.
By Thursday’s settlement, the January contract had only lost a net 10 cents ($147.85) compared to the Jan. 19 close. This was the January contract’s final trade, and the contract left the board on Friday, Jan. 26.
The March contract, on the other hand, lost almost $3 on Thursday alone. It settled at $143.92, down a net $1.68 compared to the Jan. 19 settlement.
“With the exception of spot January (supported somewhat by the cash index), feeder futures sank 165 to 255 lower,” reported Harrington on Thursday afternoon. “The sell-off here was obviously tied to the late crash in live futures. Thursday’s pull-back reinforced overhead resistance near March’s 100-day moving average at $147.81.” — Kerry Halladay, WLJ editor
