It was a short market week last week because of the Martin Luther King Jr. holiday. Once things got started on Tuesday… they still didn’t do much, at least for cash cattle.
By close of trade last Thursday, not even 1,000 head of negotiated cash fed cattle had been confirmed sold for the week. The few small groups of cattle that sold Tuesday through Thursday saw prices range from $119.95-121 live and several small groups of heifers sold at $193 dressed. There were far too few cattle sold to even come close to setting a trend, but those prices were solidly steady with the prior week’s trade.
Analysts started last week with expectation of steady at best cash trade, but that tune had changed by the end of the week.
“Reportedly Tyson is short bought on cattle currently as they need fat cattle to fill production schedules in both their Joslin, IL, and Amarillo, TX, beef plants,” reported Troy Vetterkind of Vetterkind Cattle Brokerage last Thursday.
“I know of at least 30 loads of fat cattle that were sent from SD and NE this week to Amarillo. I think this is why we saw the rally in the futures market yesterday and why I now think the fat cattle market will be at least $1-2 higher this week if not more.”
The live cattle futures did stage a surprising rally last week. On both Wednesday and Thursday’s trade, the near-term contracts gained about $2 each day. By Thursday’s settlement, the February contract, at $121.95, had gained a net $4.58 over Dec. 12’s settlement. Similarly, the April contract settled at $123.47, up a net $4.02.
“Technical signals are positive as [the February live contract] considers, with gusto, the next layer of critical overhead resistance between $120.70 and $122.10,” commented Cassie Fish of the Beef Report, additionally noting that the contract handled the Goldman Roll well the previous week.
“Following this week’s advance, futures markets are approaching a short-term ‘overbought’ condition,” warned Andrew Gottschalk of Hedgers Edge after the second day of triple-digit gains
Both near-term contracts are nearing their recent seasonal top, set in the first days of January at $123.35 for February and $124.37 for April.
Beef
Cutout prices continued to fall last week—down to $205.69 for Choice and $200.87 for Select—leading to both declining packer margins and concerns about reduced production rates.
“Packer margins remain positive,” noted Gottschalk. “Lighter production schedules will result, as a 625,000 level would seem to be more than the market can bear at the moment. Our expectation is currently for 615-618,000 for the week.”
However, he added, “This industry cannot afford to reduce weekly marketings.”
“We have no change in the forecast for the front-end fed cattle supply, which now exceeds the prior year. The pace of marketings needs to accelerate to prevent fed cattle prices from trading below $100 during the New Year. As previously stated, there are limits to how much product new demand can absorb.”
Short-term seasonal demand has slacked as January has advanced, with February being a “pork month” with consumers. Still, beef demand is still seasonally higher than years past when a long view is taken.
“It is true that boxes top the second or third week of January typically and stay defensive until the third week in February,” commented Fish. “An average decline on a percentage basis would take the Choice cutout to $195 for the February low this year. … But this year’s anticipated, seasonal price decline, at this point, seems to be motivated by seasonality and sales competition rather than backed up boxed beef inventories or poor interest.”
She also noted that January and February are “typically and historically a challenge for packer margins.” As of last Thursday, packer margins were estimated at $24/head, down from $50/head on Jan. 12.
“In today’s new normal of +$100 packer margins, everyone wonders what the new version of a tight margin is, and many conclude the packers will go red only rarely.”
Feeder cattle
Almost all of the surveyed feeder cattle auctions saw lower volumes of available cattle—several as a result of inclement weather—and lower prices. With one exception, prices on medium and large 1-class (#1) steers weighing between 700-800 lbs. ranged from the $130s-$160s with most averages in the low- to mid-$140s.
Colorado: The Winter Livestock Inc. of La Junta sold slightly fewer cattle last week than the week before, but this week prices climbed. Steer calves under 700 lbs. sold steady to up $2. Heifer calves were steady to up $1 for calves under 500 lbs., and up $1-3 for heavier calves. Yearlings were steady to down $2 with preference going to steers. Number 1, 7-weight steers traded narrowly between $144-149.
Iowa: The Denison Feeder Cattle Auction sold fewer cattle for a lower undertone last week at the special Preconditioned Feeder Calf Sale. No trends were given, but trade was called active on the reduced offerings. Two large groups of benchmark yearlings averaged $154.75 for the 714-lb. group and $153 for the 751-lb. group.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City sold far fewer cattle last week than the week before. Despite this, trends were given, seeing light steers trading steady to up $6, midweight heifers trading steady to up $3, and calves of both sexes trading up $5-10 on a light test. Two groups of benchmark steers sold with the calf lot averaging $146.68, and the yearling lot averaging $147.
Missouri: The Joplin Regional Stockyards auction sold a quarter of the volume last week than it did the week before. Hazardous travel conditions in the area were blamed for the low turnout. Light steers were called unevenly steady and steers over 600 lbs. were down $4-6. Light heifers were steady to $3 lower, while heavier heifers matched steers for discounts. Two groups of yearling benchmark steers sold between $140-147.
Montana: The Public Auction Yards only sold 706 head of cattle, too light a test for any market trends. However, higher undertones were reported. Cold and icy weather was credited for some of the decline in offerings. Two small packages of #1, 7-weight steer calves averaged $146.12 for the 714-lb. group, and $141.96 for the 793-lb. group.
Nebraska: Volumes were slightly down at the Bassett Livestock Auction Market last week, and prices followed suit. Steers were steady to $4 lower, while mid-weight heifers were down $3-9. Two large groups of #1, 7-weight yearling steers sold with the light “fancy” lot averaging $172.32, and the heavy general lot averaging $153.28.
New Mexico: The Clovis Livestock Auction sold about half of the cattle last week that it did the week before. Prices on all feeders were up about $3-6, with instances of up $7-15 on 3-weight heifer calves and 7-weight yearling heifers. Lots of benchmark yearling steers and value-added calves averaged in the mid-$140s, while the three-head group of calves averaged $138.
Oklahoma: The Oklahoma National Stockyards saw a decline in both volumes and prices. Feeder steers were down $2-6, while heifers were steady to down $6, with preference for lighter animals. Calves of both sexes were down, with steer calves seeing smaller declines than heifer calves. Benchmark steers ranged from $138-157.75 with a load of fleshy yearlings setting the base.
South Dakota: The Hub City Livestock Auction sold fewer cattle last week, but the prices were higher. Heavy steers were up $4-7 with instances of up $10 on 8-weights. Heifers were steady to up $7, with instances of up $12 on 6- and 7-weights. Two very large groups of benchmark steers sold between $147-169.
Texas: Feeder cattle sold steady to down $3 at the Amarillo Livestock Auction last week. Trade was called active on good demand as the area has been dry and mild lately. An 18-head lot of 713-lb. #1 yearling steers averaged $144.44, while a four-head group of 766-lb. #1 steer calves averaged $130.
Wyoming: The Torrington Livestock Commission was the only one of the surveyed auctions to sell more cattle last week than the week before. Prices were also up. Light steer calves were up $6 with instances of $12 higher. Steer calves over 500 lbs. were up $4-8 and yearling steers were up $2-5 on a limited test. Light heifer calves were an uneven steady, while heavier heifer calves were steady to up $5. Yearling heifers were up $4-6 with instances of $12 higher. The auction noted the quality on the offering was quite high. Benchmark yearling steers ranged from $145-167.
Feeder futures followed suit with live cattle futures, with near-term contracts gaining about a net $5 by Thursday, Dec. 18 compared to Dec. 12. The January contract, which will expire this week on Jan. 26, settled last Thursday at $149.17. The March contract settled at $147.30.
“Encouraged by signs of bottoming live futures, specs and commercial buyers chased feeder issues $0.12 to $1.30 higher,” commented DTN’s Livestock Analyst John Harrington. “Both January and March closed right below 100-day moving averages.” — Kerry Halladay, WLJ editor
