While the supposed “trade war” with China was kicking off last week, the cattle futures put on a perplexing rally. The cash cattle and beef markets, on the other hand, continued their downward trajectory.
First, the bad news: Cash prices.
By close of trade on April 5, almost 57,900 head of negotiated cash fed cattle had been confirmed sold for the week. The bulk of that traded on Wednesday with prices of $114-118 live (average $114.54) and $184-190 dressed (average $186). Prices were slightly better on Thursday, with averages of $114.93 live and $189.98 dressed. Still, these prices were down compared to the prior week’s averages of $121.68 live and $191.89 dressed.
“The price decline to-date from the $130 cash high is 10 percent,” commented Andrew Gottschalk of Hedgers Edge on Thursday. “The average decline is 15.8 percent, for a cash target price of $109.50. We are maintaining the cash outlook for the year in a range from lows of $101-103 to highs at $131. A weekly low at $101-103 would represent a 22 percent decline. This would fall short of the average decline during the past three years of 29 percent.”
Similarly, the beef cutout prices continued to decline last week, with the Choice cutout declining about $6 over the course of the week. By close of trade on April 5, Choice stood at $215.09 while the Select cutout was $206.31, down about $2.
Gottschalk suggested this was some cause for optimism however.
“As a reminder, the month of April has proven to be a disappointment for beef demand in past years. Ads in local papers this week were devoted to mostly pork and ground beef. The good news is May and June are the best demand months of the year for beef. The current decline in cattle prices and cutout values will allow retail beef margins to expand further, setting the stage for aggressive beef features during the aforementioned period. This action could prove to be the basis for a temporary price low and cash rebound, followed then by renewed selling as the ‘dog-days’ of summer arrive.”
The good news: Futures.
On the week-level comparison the near-term live cattle futures didn’t do much; up a net 55 cents in April at $114.30 and up a net $2.48 in June at $105.05. However, compared to the intra-week lows set on Tuesday—$111.97 for April and $99.62 for June—the Thursday settlements were spectacular relatively speaking. Both Wednesday and Thursday saw triple-digit gains despite the rapid-fire news of retaliatory tariffs from China.
“After gapping lower on the open yesterday and trading nearly limit down on China trade fears, both live and feeder cattle staged an impressive reversal and rallied to limit up through the day to settle just shy of limit bid by the close,” commented Troy Vetterkind of Vetterkind Cattle Brokerage on Thursday morning.
“That should be the trade the bulls in the marketplace have been looking for and should at least for the near term establish a near-term bottom.”
Feeder cattle
As with last week, feeder cattle auctions performed very differently depending on when they happened during the week. Early-week sales were generally depressed, while later-week sales got a boost from the rapid gains in the feeder futures.
Compared to the intra-week low set on Tuesday, the near-term contracts gained about $7 by Thursday with a settlement of $137.47 for April and $138.05 for May.
“April and May feeder cattle have blown up through their respective first areas of overhead resistance at $135-136 and if they can hold this area have a chance of moving back up to $140,” opined Vetterkind on Thursday morning.
Medium and large 1-class (#1) feeder steers weighing between 700-800 lbs. ranged widely, down as low as the mid-$120s and up as high as the upper-$160s. Weather and the background of feeders also impacted the individual markets.
California: The Cattlemen’s Livestock Market in Galt called feeders steady last week. Number 1, 7-weight steers sold last week ranging from $125-135.50.
Colorado: The Winter Livestock auction in La Junta sold over 5,600 head last week, well over the 793 sold the week before. On the few comparable sales, feeders under 700 lbs. were steady and heavier feeders were down $5-8 with instances of $10 lower. Benchmark steers traded between $127-140.
Kansas: According to the mid-session report from the Pratt Livestock auction, an estimated 3,300 head of cattle sold at the most recent sale. Feeder steers were called firm to up $5 for the most part, or up $10-20 on those animals coming off of grass on a vaccination program. Heifers were steady to down $2. Prices on benchmark steers ranged from $140-162.
Nebraska: The Bassett Livestock Auction Market had no recent test of the market due to no sale the week before. Demand was called very good as the warmer weather has put more buyers in the seats. A pair of large lots of #1, 7-weight steers sold between $147-167.
New Mexico: Feeder steers under 600 lbs. were called mostly $2-3 lower at the Clovis Livestock Auction last week. Heavier steers were down $7-9 except for 8-weights, which were $13 lower. Heifers were down $6-10. Two lots of #1, 7-weight steers sold between $124-134.
Oklahoma: At the OKC West-El Reno sale, only 3,013 head sold last week. Feeder steers under 850 lbs. were up $2-4 while heavier steers were down $6. Heifers under 700 lbs. were called steady, while heavier heifers were down $2-3. There were no trends offered on feeder calves due to limited comparable trades, though demand was called moderate. Cold weather was blamed for the relatively low volume of the offering. A half dozen lots of benchmark steers were offered, with prices ranging from $138.50-149.
South Dakota: At the Hub City Livestock Auction, the offering was light with the best test being on heavy (900+ lbs.) steers, which were steady to up $1. Demand was said to be good for the light offering, particularly for backgrounded steers and other home-raised cattle. Prices on the few benchmark steers ranged from $139-147.75. — Kerry Halladay, WLJ editor
