Last week saw humble gains. Almost everything was up, but only just a bit.
With cash fed cattle, negotiated prices were steady to slightly higher than the prior week at $108 live. However, by the close of trade on Thursday, not even 2,000 head had been confirmed sold.
“Yesterday’s futures close may tip the cash trade balance in favor of the producer; steady to higher,” observed Andrew Gottschalk of Hedgers Edge last Wednesday. “After violating trendline support, futures recovered to close above this trendline.”
There were moderate net gains seen in the live futures market last week. By Thursday’s settlement, the October contract had gained $1.05 with $110.15, and the December contract had gained 80 cents with $116.05.
“Given what is known about supply and seasonals, the market seems fairly well priced,” commented Cassie Fish of the Beef Report. “All in all, this may not be the most exciting trade ever observed, but the market acts pretty good in total, considering the large production level and the ability of this market to find value in the midst of it.”
Production levels last week dipped, however. Production was expected to be “challenged” to process 636,000 head. The cutout values did inch higher however.
“Product values are struggling to advance,” said Gottschalk. “This is concerning, given a reduced production schedule this week.”
By the close of trade on Thursday, the Choice cutout had moved up a net 63 cents to $197.25. The Select cutout gained a net 28 cents.
The quality of the fed cattle, and the shift in cow slaughter volume, might begin to have an impact on cutouts however.
“The percent of YG 4s and YG 5s is increasing and will continue to exert selling pressure on 50/50 trim,” warned Gottschalk. “Lean trim should come under increased selling pressure as cow slaughter increases seasonally. This should bode well for ground beef, as retailers are expected to increase features and lower their average price.”
But this favored “cut” of beef isn’t the only thing that could drag on the overall value of cattle. There’s more to it than meat.
“The value of byproducts sold by beef packers coming from the slaughter of steers and heifers has been unusually weak since mid-year,” noted the CME Daily Livestock Report.
“Heavy native steer hide values have accounted for most of this decline, dropping from $66 per piece in late June to current market prices around $60 last year. This same grade of hides was trading for $75 in late June, declining slightly through the summer to finish September at $74, according to USDA’s Agriculture Marketing Service.”
They noted that the hide usually accounts for half of the “drop value.” Trade also has its hand in this market.
“Export data for hides from USDA’s Foreign Agriculture Service shows a big increase in hide exports this year,” continued the CME Daily Livestock Report last Thursday. “The monthly count of bovine hides exported, both whole and pieces, so far this year is running close to 60 percent of commercial cattle slaughter …
“An inference that the difference between cattle slaughter and hide pieces exported represents domestic hides marketed for leather products made in the U.S. might be valid. If this is the case, then domestic leather product manufacturing sourced from U.S. hides fell by more than 20 percent from the year prior during the April-June interval,” they speculated.
Feeder cattle
The surveyed feeder cattle auctions reported a cash feeder cattle market last week that was mixed but mostly up. It continues to be a split market between calves and yearlings with calves seeing discounts of $20-30 when compared to their more mature weight-class peers.
Medium and large 1-class (#1) steers weighing between 700-800 lbs. were steadily in the $150s for yearlings with some extreme outliers going down to the $130s or up to the $170s. Where described, demand was mostly good.
California: Things were steady last week at the Cattlemen’s Livestock Market in Galt, both volumes and prices. All feeder animals were called steady. Benchmark steers were still trading in the $130-150 range.
Colorado: More cattle traded at the Winter Livestock sale of La Junta last week than the week before. Prices on feeder cattle were steady at worst, with some 5-weight steer calves seeing gains of as much as $10, though most gains on calves were in the $3-5 range. Yearlings of both sexes were described as steady to up $2. Two groups of #1, 7-weight yearling steers both averaged in the mid-$150s.
Kansas: The Winter Livestock Feeder Cattle Auction of Dodge City sold more than double the volume of cattle last week as it did the week before. There were few comparable sales, but those that existed were steady to lower. Best comparison was on 750-850-lb. steers, which traded $2-6 lower. A large group of 768-lb. #1 yearling steers averaged $158.39, while a small group of 746-lb. calves averaged $138.50.
Missouri: The Joplin Regional Stockyards sold all feeder cattle steady to up $5. Demand was called good for yearling feeders and moderate for calves. Number 1, 7-weight yearling steers ranged in price from $151-157.
Nebraska: The Bassett Livestock Auction Market sold heavy steers with $2-3 gains last week compared to the prior sale two weeks before. Heavy heifers were steady. Demand was called good. A pair of small groups of #1, 7-weight yearling steers sold for $164 and $173 with no notes to explain the high prices.
Oklahoma: Over 7,800 head sold at the OKC West-El Reno sale last week. Feeders of both sexes sold up $1-3 for yearlings. Steer calves were down $2-4 and heifer calves were down $1-2. Demand was called light to moderate despite the offering being described as plain to attractive. Standard benchmark yearlings ranged in price from $152-164.50 while calves and fleshy yearlings ranged from $133-144.
South Dakota: Feeder steers at the Philip Livestock Auction were steady to down $5 with preference for midweights. Most heifers were severely discounted, seeing prices off by as much as $10. Steady prices were seen on heavy heifers. An 85-head group of #1 steer calves averaging 710 lbs. brought $168.
Wyoming: Just over 3,050 head sold last week at the Torrington Livestock Commission. Feeders of all sexes and ages sold steady on good demand. Two large groups of benchmark yearling steers sold between $157-162.50.
Near-term feeder cattle futures also saw modest gains alongside their live cattle compatriots. The October contract gained a net $1.37 with $153.57 while the November contract gained a net 85 cents to settle Thursday at $154.85.
Vetterkind opined that the feeder cattle futures both have “very good near-term support” at $150 for the October and November contracts.
“The key to taking out the aforementioned overhead resistance levels will be how strong cash can perform in the next couple of weeks. Until more is known about that I suspect we are going to chop around in the ranges outlined above.” — Kerry Halladay, WLJ editor
