The entire meat and cattle complex were moving sharply higher last week. Fed cattle started trading in Kansas and the Southern Plains at $103 and by Thursday, they were trading at $105. Iowa reported some cash trades at $107. Northern Plains feeders were holding out for higher prices, asking $168; packers offered $166 and there were no takers.
Futures markets also rallied as the cash markets became stronger. The August live cattle contract was several dollars higher for the week, closing Thursday at $107.05, and is the highest level since early March. October contracts settled Thursday at $110.15, also its highest since March.
The Labor Day rally is in full gear, packers are running at modest slaughter levels.
Last week’s kill was expected to be 630,000 head. Beef demand is holding the market back, but Labor Day orders are pushing the spot market higher on the cutout values. Choice reached $110.95 and Select reached $197.41 on 139 loads. July cattle feeding returns posted the bleakest month yet in 2020.
Cassie Fish, market analyst in The Beef, reported Thursday, “There was big trade volume in the South, especially in Texas where backlogged numbers continue to get cleaned up. This morning in the North a couple of majors have bid $166 and been passed. Nebraska has had the smallest trade volume week to date as cattle feeders in that state are the most current.
“How much of the additional increase in the cutout value can cattle feeders leverage and take for themselves? That’s the question on everyone’s mind on both sides of the business right now—packer or cattle feeder.
“So, for now, its higher futures, higher cash cattle prices and higher boxes heading into the third week of August 2020. Will futures fill the big gaps left in February 2020? Can cash cattle prices grab a bigger piece of the pie?
“The government released the July retail beef price data yesterday and prices dropped 79 cents from $7.38 to $6.59 per pound. Still a record but at least headed in the right direction. The USDA just released actual slaughter and carcass weight data. Steer carcasses clocked in at a record 905 pounds, up 2 pounds from a week ago, up 33 pounds from a year ago. The actual slaughter was 636k head, down 2k from the estimate.”
Livestock Marketing Information Center (LMIC) estimated fed cattle losses were about $200 per head for cattle marketed in July. That was the fifth consecutive month of red ink. LMIC has been estimating monthly cattle feeding returns since the mid-1970s. Those estimates assume feeding-out a 750-pound steer in a commercial Southern Plains feedlot and include all costs of production. The estimates are not survey-based and presume normal weather conditions. Cash prices are used, that is, fed cattle prices and feedstuff costs are not hedged. Furthermore, it assumes a normal marketing window, based on a standard cost of gain.
Fish also remarked, “Backlogged cattle are still around, though most of them appear to be cattle already committed to a packer, which is why there is quite a bit of difference in how each packer is behaving. Cattle slaughter has been reduced this quarter compared to a year ago, a little over 50k head including this week. The smaller kills are the packer’s way of rationing the smaller supply. Expect kills to fall short of a year ago the rest of the quarter, as heavier weights easily cover any shortfall and beef demand is soft.”
Feeder cattle have been trading higher at the CME and starting to feel some pressure at these levels: August feeders lost 30 cents to $144.95, September lost 57 cents to $147.37, and October is down 57 cents to $148.47. We get close to $150 and feeders slow down, but coming into the fall run, calves and yearlings should hold.
National Stockyards, Oklahoma City, OK, offered 8,368 head Monday and reported, compared to last week: Feeder steers steady to $3 lower and steer calves steady to $3 higher. Feeder heifers mostly steady to $2 lower and heifer calves unevenly steady. Demand was moderate to good. Monday’s sale included just over 1,200 head of cattle from the Oklahoma Angus Association. These cattle are identified as value added in the report. Benchmark steers weighing 728 lbs. had a weighted average of $146.81.
Huss Livestock Auction in Kearney, NE, offered 2,670 head last Wednesday and reported compared to the prior week, lightweight fall calves sold $3-5 higher; yearling feeders sold steady to $4 higher. Demand was good for all offerings with a large crowd of buyers in attendance. Benchmark feeder steers weighing 750 lbs. sold for $149.50.
Turlock Livestock Auction Yard in California, held their 14th fall calving, bred cow and heifer sale Aug. 8, and had a remarkably good sale. Bred heifers sold between $1,800-2,625 and bred cows sold between $1,700-2,100. Max Olvera, yard manager, said this sale was extremely encouraging for the cattle business in California. — Pete Crow, WLJ publisher
