Cash fed cattle trade is trending down and taking feeder cattle with it. Cash trade was slow most of last week with 62,327 head trading hands through Thursday and selling between $105-108 live, with a weighted average of $107.55, down $1 from the week prior. Dressed trade was between $166-169 with a weighted average of $168.21. There were 24,600 formula cattle priced Thursday weighing 907 lbs. that brought $176.24.
It appears there isn’t much interest in cattle futures and we’re at a point where the market should turn higher, but isn’t. Packers seem to have plenty of cattle around them and are not very aggressive buyers. Slaughter has been stable with around 119,000 head processed daily. The boxed beef cutout fell about $6 last week with Choice quoting $210.48 and Select at $196.50 on a respectable 236 loads.
At the CME Thursday, October live cattle traded lower by 55 cents to $107.55 and December lost 65 cents to $109.82. Feeder cattle did gain a bit on the nearby months but were damaged in the deferred months. October feeders were 55 cents higher to $138.92, November was 15 cents higher to $136.47, but January lost $1.22 to settle at $132.10.
Rick Kment, DTN analyst, said, “Cash cattle market direction has become disappointing to say the least, with packers unwilling to increase bids through the first half of the week. The combination of recent futures market erosion and pressure in boxed beef prices led to feeders giving into lower price levels Wednesday afternoon where light trade was reported in several areas.
“Southern live trade is reported at $108 per cwt, while Northern dressed business is reported to be done at $169 per cwt. These prices are generally 50 cents to $1 per cwt below last week’s price average and may be enough to set the lower tone for the week.
“The amount of cash purchases done for delayed delivery over the last month will continue to limit the short-term appetite for packers’ need for cattle. But this still does not offset the expectation that cattle numbers will continue to tighten over the coming weeks based on limited spring placements.
“Pressure developing in live cattle and feeder cattle trade sparked underlying concerns that the limited volume Monday which sparked widespread losses could bring about additional longer-term bearish market shifts as traders remain concerned about the ability to stimulate active beef demand through the end of the year. December live cattle futures closed at $110.27 per cwt Wednesday, although current prices are slightly above initial support levels, longer-term target support levels remain at $107.82 per cwt.”
Cassie Fish, market analyst in The Beef mentioned that carcass weights are still huge. “Steer carcass weights last week were unchanged at 924 pounds and fell 4 pounds short of the all-time record posted in 2015, also the last time the current number of Yield Grade 4s and 5s were close to that 2015 record. Not a surprise because of the two-month slaughter disruption earlier this year that resulted in a significant backlog of fed cattle.
“The industry has made progress, but fed cattle supplies in general are adequate and packers have retained a great deal of leverage. The seasonal low in boxed beef prices is being made now, two weeks later than ‘normal’ since a very strong and rather unusual rally in loins especially lifted the cutout in late September. Trim and grinds continue to be a drag thanks to lost food service, but a seasonal rally in middles will occur between now and Thanksgiving. The August rally to $230 would seem a modest objective.
“Packer margins remain solid and they can balance throughput with demand deftly. A brisk pick up in orders translates to Saturday hours being added.”
She added, “All of this has pressured live cattle futures this week and open interest has declined 11k contracts. Live cattle 2021 contracts have not taken out Tuesday’s low today and are sitting on the 100-day moving averages. Most active Dec LC has made a new low for the week. All are below the 40-day moving average except liquidating Oct LC.”
Feeder cattle
Feeder cattle have been under pressure by the CME and cash markets are responding. December corn moved over $4, adding more pressure to calf prices. The big runs have started and it’s getting harder to find true yearling feeder cattle.
The folks at the Cattle Report reported, “The rally in replacement prices has run out of gas. Higher grain prices and increasing drought areas of the country are troubling the demand side of the market. The USDA corn stocks report followed by a reduction in corn acres has moved the corn above $4 in some contract months. Additionally, continuing drought in the Southwest is causing some liquidation and premature selling of cattle. Winter grazing areas now are facing the possibility of fewer grazing opportunities. Buyers will be cautious proceeding with purchases in the coming weeks.
“Dry weather, dust, and extreme temperature changes are the hallmark of health problems for weaner calves. Health regimes that are popular with those dealing in high risk cattle are often costing in excess of $30/head before operators move to individually treated cattle. The lure of heavily discounted prices for those cattle is frequently enough to encourage some brave soul to make a purchase followed by a pledge to never do that.”
La Junta Livestock Commission in La Junta, CO, sold 3,952 head and reported compared with the week prior: Steer calves under 600 lbs. sold $5-8 lower, except for 500-550 lbs. sold steady; and 600-700 lbs. sold $2-3 lower. Heifer calves under 600 lbs. sold $3-5 lower, and over 600 lbs. mostly steady. Yearling feeder steers over 700 lbs. sold $2 lower. Yearling feeder heifers over 700 lbs. sold steady. Slaughter cows and bulls sold $2-3 higher. Benchmark steers weighing 774 lbs. averaged $127.13.
Huss Livestock Auction in Kearney, NE, sold 3,007 head and reported, compared to the week prior: Steers under 700 lbs. sold steady to $4 lower; over 800 lbs. sold $3 higher; heifers under 750 lbs. sold steady to $4 lower; and over 750 lbs. sold steady to $3 higher. Demand was moderate to good throughout the auction. Benchmark steers weighing 785 lbs. averaged $150.
Joplin Regional Stockyards in Carthage, MO, sold 5,433 head and reported, compared to the week prior, steers under 700 lbs. sold $3-5 lower; over 700 lbs. sold steady to $3 lower; heifer calves sold steady to $3 lower; and yearling heifers were steady. Benchmark steers weighing 783 lbs. averaged $137.51. — Pete Crow, WLJ publisher
