It’s odd how much fear can be felt in the markets while immediate fundamentals are so strong. The future of the cattle market—as well as the cattle futures market—seemed to be on everyone’s mind.
“Cattle feeders are willing sellers as they want to keep cattle moving and stay current,” commented Troy Vetterkind of Vetterkind Cattle Brokerage. “Also, many of the fat cattle that are currently selling are at breakeven or even penciling a little profit, so with the discounted futures board there is no reason not to sell cattle, which again, the packer knows.”
Packers capitalized on the situation, buying a lot of cattle a lot faster and a lot cheaper last week than they did the week before.
Negotiated cash fed cattle traded at unusually large volumes early last week. Over 23,000 head sold on Tuesday, Wednesday saw over 50,000 sell, and another 40,000 or so head sold on Thursday, bringing the week’s confirmed total to almost 121,500 head prior to print. This kind of volume has been what recent weeks have seen only when everything is totaled the following week.
Wednesday’s bulk sold for mostly $126 live and averaged $201.85 dressed. On Thursday, prices fell to averages of $125.33 live and $201.53 dressed.
Live cattle futures continued their decline last week. Many analysts credited concerns over looming large fed cattle supplies for this “meltdown.” On Thursday, however, near-term contracts regained about $1 in the day’s trade with settlements of $118.15 for April and $108.40 for June. These gains did not come close to reversing the net $3 losses suffered earlier in the week however.
“After what seems like weeks, CME cattle futures are green today, getting a technical bounce,” commented Cassie Fish of the Beef Report on Thursday afternoon. “There’s no ‘reason’ other than the market is very oversold. Bearish perceptions about April, May, June persist the same as the market’s dismissal of positive, immediate fundamentals.”
Continued, surprisingly strong beef demand was among those positive fundamentals.
“Good demand will serve as a buffer to lower prices,” noted Andrew Gottschalk of Hedgers Edge. He predicted the cash fed cattle low would be $101-103, provided no severe backlog develops, but cautioned that demand will not eliminate lower cutout values.
“An early Easter may lend sufficient support to the product market to temporarily break through resistance for the Choice cutout at $225,” he added, noting that such a condition would not likely last long.
At Thursday’s close, the Choice cutout had again managed to reach $225.21. Though down a net 38 cents compared to March 16’s close, it represented a relatively strong gain beginning mid-week. The Select cutout made it to $218.02 by Thursday’s close of trade, up a net $1.34 compared to March 16’s close.
Feeder cattle
Both cash and futures prices suffered in the feeder cattle market last week. Near-term futures lost roughly $2.50 over the course of the week, though at the week’s low on Wednesday, the losses were more like $4. By settlement on Thursday, the March contract stood at $137.52 and the April contract stood at $138.02.
The futures’ poor performance was blamed repeatedly on cash auction reports. Feeder cattle were unanimously down, with many classes seeing week-to-week losses over $10. Medium and large 1-class (#1) steers weighing between 700-800 lbs. were pointedly down, with ranges starting at $130 and running up into the mid-$150s.
Kansas: Volumes were down at the Winter Livestock Feeder Cattle Auction in Dodge City and prices were much lower. Medium- to heavyweight feeder steers were down $5-10 while comparable heifers were down $4-8 with instances of down $12. Feeder calves of both sexes were described as having “an extremely lower undertone” on light supplies. One lot of 276 head of #1 yearling steers averaging 779 lbs. brought $134.51.
Montana: Volumes were up at the Miles City Livestock Commission last week, but the auction was holding a special replacement sale, meaning there were few feeders. Most classes of feeders were too lightly tested for a market trend. The best test was on 5- and light 6-weight heifers which were called unevenly steady. There were two lots of benchmark yearling steers reported sold; the 71-head group weighing 706 lbs. averaged $155 while the 20-head group weighing 755 lbs. averaged $145.75.
Nebraska: The Huss Platte Valley Auction saw over 1,600 fewer cattle sell last week compared to the prior week. Despite this, prices were down. Light steers were $4 lower, while steers over 650 lbs. were down $6-8 with instances of down $15. Light heifers were $9 lower and heifers over 600 lbs. were down $2-5. The feeder futures board was blamed for buyers’ reluctance to get involved with the sale. Prices on benchmark yearling steers ranged from $134-151.25.
New Mexico: Prices and volumes were down at the Clovis Livestock Auction as well, with light feeder steers $8-9 lower, heavier steers down $9-10 with instances of $16 lower on 6-weights. Heifers fared worse, with light heifers down $10-11 and heifers over 600 lbs. down $7-10. Prices on #1, 7-weight yearling steers were down to $130-139.
Oklahoma: The National Stockyards of Oklahoma City saw a sizable decline in feeder cattle sold last week at only 7,434 head. Prices on all yearling feeders were called $3-6 lower and calves were called $4-10 lower. Drought and poor weather were partially blamed for the situation. Several lots of benchmark steers sold, ranging widely from $134-154.
Wyoming: The Torrington Livestock Commission sold less than half of the number of cattle last week that it sold the week before. Steer calves were called $10-13 lower with yearlings down $3-9. Heifer calves were called steady to down $9, and yearlings were down $8-13. Benchmark steers traded relatively strong at $145.50-153.50. — Kerry Halladay, WLJ editor
