It has been a long, drawn out period of asking, “Have we hit bottom?” and probably—accurately—answering “yes.” But the benefit of hitting bottom is that things can only go up.
The cash fed cattle market got off to a painful start last week, if it could be called a start at all. Only 56 out of 1,063 head offered sold during last week’s Fed Cattle Exchange. That lone lot of Kansas steers sold for $116, below the prior week’s live cattle level. Luckily, that was not all the cash market wrote that day.
Over 16,000 head traded that day at a range of $115-118, with the average for live steers being only slightly higher than the Fed Cattle Exchange’s $116. Though disappointing, Andrew Gottschalk of Hedgers Edge said it might be a hopeful sign.
“Yesterday’s action has allowed some base building to develop which could serve to launch a seasonal price recovery,” he commented last Thursday morning. “Cash support exists at $115 with initial resistance at $122 followed by $125.”
Cassie Fish of The Beef Report also saw last Wednesday’s cash fed cattle trade behavior as intriguing.
“After picking up some fed cattle purchases at cheaper money yesterday in Kansas, the negotiated fed cattle trade began to strengthen, especially in the north. By early afternoon, cash trades of $117, steady with last week and then $118 were reported and even with the higher money, packers did not get fully covered everywhere,” she recapped Thursday morning.
“The interesting part of yesterday’s action is the why. Those who have been around this business understand only one explanation is feasible, which is that fed cattle supplies, especially in the north, are still quite current relative to the pace of fed cattle slaughter. Perhaps, a few astute observers have commented, the industry is even more current than perceived. This assertion cannot be proved however other than with more time.”
By close of trade Thursday, over 66,000 head had been confirmed sold for the week and the range on cash fed live cattle shifted upwards slightly to $115-119. This shifted averages to $117.83, above that of the prior week. Dressed cattle traded for $187-193.50 (average $188.42) which was also up from the prior week.
Troy Vetterkind of Vetterkind Cattle Brokerage was looking to the future last week.
“The question [now] will be can we trade $119-120,” he noted. “I think that is not out of the realm of possibility if packers need cattle to process to fill Labor Day beef orders. I still feel like the market has got some headwinds going into the September/October timeframe, but as mentioned in previous writings, there will be weeks where they need some cattle and the market can trade steady/higher.”
The cash fed cattle market was not the only market that saw some beleaguered gains. After a couple weeks of declining, the live cattle futures saw some gains last week. The August contract gained a net $2.32 over the course of the week, settling last Thursday at $115.22. The October contract gained a net $2.40 to settle at $114.82. The bulk of the gains came during Wednesday’s trading, with other small gains made earlier in the week.
Vetterkind’s reading of the futures market tea leaves was mixed for the immediate future.
“There is nothing to rule out a $119-120 cash market between now and Labor Day, which means we could get the futures market up an additional $1.50-2.00, but I wouldn’t expect the market do much past the mid-July highs of $119.50 in October live and $120 in December live cattle,” he opined.
Fish’s reading was more optimistic.
“Technically the market is in great position to stage a rally and many contract months have risen back into the gap area left after the July 21 USDA Cattle on Feed report,” she observed. “Only [the August live cattle contract], which faces continued liquidation ahead of options expiration and First Notice Day, has yet to eclipse [July 24-28]’s high. And it is noteworthy that the market rejected the $111-112 area.”
Aside from the news of Japan’s beef tariff increase, the big beef demand news last week involved the positive domestic impact of low cutout prices. With a Thursday close of $205.16 for Choice and $197.78 for Select, the wholesale beef market continues to attract retail interest.
“King Soopers, a division of Kroger and Safeway led with good steak ads,” reported Gottschalk, who is based in the Denver area of Colorado. “King Soopers has Choice bone-in rib-eyes at $5.47 while Safeway led with Choice T-bones at $6.88. Point: Retailers are responding to the restoration of their margins. The intense competition at retail for foot traffic favors aggressive beef promotion.”
This means good things for domestic demand as well.
“Demand continues to be a pleasant surprise,” Gottschalk commented after noting that last week was payday for many consumers. “August beef demand normally improves by 1.7 percent from July. July generally is the weakest demand month of the year.”
Feeder cattle
The reports of feeder cattle auctions across the country were surprisingly light last week for a non-holiday. Several of the usual surveyed auctions did not post results due to “seasonally light receipts.” There was a mixed trend in those that did report their sales, however.
Medium and large 1-class (#1) steers weighing between 700-800 lbs. were notably fewer and farther between last week. Sales that usually have a large offering of these market benchmark animals had conspicuously light offerings. Despite this, the cattle that sold in this category again ranged mostly from the $140s-160s. Most quoted averages had slipped slightly however.
California: All things save the headcount were steady last week at the Cattleman’s Livestock Market in Galt. Sales volumes declined to 1,600 head, and prices on benchmark steers remained between $127-140.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City sold over three times the number of cattle last week as it did the week before. Despite this difference in sales, there were several market trends noted. Feeder steers were called $3-6 higher with a few of the lighter-fleshed feeder steers bringing in $8-10 more. Heifers traded unevenly, but most went for steady money to $3 more except for light 7-weight heifers, which were down $2-3. Calves were too lightly tested for a comparison, but a higher undertone was noted. Several large groups of #1, 7-weight yearling steers sold between $150-163.50.
Missouri: The Joplin Regional Stockyards sold fewer cattle last week, and prices on feeders were mixed. Steers under 700 lbs. were steady to down $3, while heifer calves were steady to up $2 and yearlings were steady. A couple groups of benchmark yearling feeder steers ranged from $145-153.85.
Nebraska: The Sheridan Livestock Auction sold over 1,700 head last week, but had no sale the week before, making comparisons impossible. However, buyers were said to have bid readily and were especially interested in the strings of quality yearling cattle. A pair of small strings of #1, 7-weight yearling steers averaged $160.25.
New Mexico: The sales volume at the Clovis Livestock Auction was very steady last week, though prices were mixed on feeders. Steers were called $2-5 lower and limited comparable sales, though Holstein steers were called steady with the most recent Holstein sale. Feeder heifers on the other hand were up $2-5. Just five head of benchmark steers sold; three yearlings and two calves. The yearlings averaged $143 while the calves averaged $146.
Oklahoma: The OKC West-El Reno sale sold fewer cattle at higher money last week compared to the week before. Feeder steers sold $2-4 higher. Heifers were steady on limited offerings as were calves of both sexes. Demand was called moderate on the plain to attractive offering. Cooler weather and some moisture was credited some of the improved demand. Prices on yearling benchmark steers ranged from $151.75-157.
Texas: Volumes at the Amarillo Livestock Auction were down at only 400 head compared to the prior week’s 555 head. Feeders of both sexes sold steady to down $4 on limited sales. Trade was slow to light. There were no #1, 7-weight steers sold, but a five-head group of 650-lb. steer calves averaged $138 and an eight-head group of 813-lb. yearling steers sold at $141.
Just as with the live cattle, feeder cattle futures saw a nice rebound with most gains achieved on Wednesday’s trade. Over the course of the week, the August contract gained a net $4.60 to settle at $150.65. The September contract gained a net $4.10 to settle Thursday with $151.20. — Kerry Halladay, WLJ editor
