Thursday markets
Fed cattle markets were sluggish this week, but feeders eked out a little gain on negotiated cattle. Packers processed more than 300,000 formula cattle. By today, there were 84,662 negotiated cash cattle sold at an average live price of $97.14 and $157.64 dressed. Today, 33,800 head were priced on the formula grid and averaged $157.12 weighing 884 lbs.
Futures markets were lackluster as ShayLe Stewart, DTN market analyst, pointed out, “Live cattle contracts are sitting back idly as the industry doesn’t have support from traders to rally nearby contracts higher and the lack of momentum from the cash market has been disappointing as well.
“August live cattle are down 65 cents at $100.85, October live cattle are down $1.12 at $104.60 and December live cattle are down $1.10 at $109.02. Asking prices for cattle this week are $98 or better in the South, and $159-160 in the North. For the most part, packers have just been quiet, calling on a few pens of cattle here and there but not showing great interest this week. Packers have shown a lot of acquisition since the first week in June, averaging 113,312 head of cattle purchased each week, giving them a hefty inventory to work through.”
Slaughter started off slow this week, then picked up toward the end of the week. By today, estimated slaughter was 120,000 head. There were 472,000 head processed through today, 2,000 head more than last week, but 8,000 head behind the same week last year.
Cassie Fish, market analyst in The Beef, pointed out, “USDA just released the actual cattle slaughter for the week ended July 11 and lowered the kill 8k head. This has been a consistent pattern since the COVID-19 production loss.
“Steer carcass weights were 902 pounds, up 6 pounds from a week ago, up 37 pounds from a year ago and the first time carcass weights have been reported above 900 pounds in July in any time in history.”
“Given this week’s physical market action, the mid-$90s on cattle prices and $200 in Choice boxed beef prices represent value. The last five years though, both boxed beef and cattle prices have sunk to a new low in September.
“The argument that this won’t occur this year is because of the lighter spring placements. Two things are much different than a year ago. One, carcass weights are much heavier which translates to production trumping headcount. Two, retail prices are about $1.50 higher and beef demand is no longer robust as it was in 2018 and 2019.”
Spot sales of boxed beef were a bit stronger with the Choice box picking up $1.110 to $202.26 and Select $1.51 higher at $190.79 on 123 loads. The cow beef cutout on July 17 was $192.58, still higher than Select-grading beef.
Feeder cattle markets have been very strong. Northern Video Auction had a three-day sale and sold lots of Montana calves weighing between 500-600 lbs. and were trading between $145-155; the NHTC and Verified Natural cattle were bringing $10-15 more.
Feeder cattle futures backed off its recent rally, Stewart reported, “After some slight regression and hesitation earlier this week, the feeder cattle complex has jumped back to its recent surge of fully higher prices. August feeder cattle are down 50 cents at $142.85, September feeder cattle are down 10 cents at $143.17 and October feeder cattle are down10 cents at $143.42.
“The industry has been steadily backed by the rigorous buying throughout the countryside and continues to see sales report constantly steady to higher prices. Not to mention farmer feeders look at cheap corn prices and see feeders to use up some of that supply.”
Country markets were also having a good week. OKC West in El Reno, OK, offered 5,653 head and reported feeder steers sold $1-3 higher and feeder heifers traded $4-5 higher. Demand was good to very good. Steers and heifers were very lightly tested, but where very few comparable sales could be noted, trades were $1-2 higher. Benchmark steers weighing 778 lbs. averaged $141.77.
The folks at the Cattle Report forecast, “Weather is always a prime influencer of ag markets. Mid-summer always seems to feature a super-hot period when highs stall over the mid-section of the country and threaten the corn crop and livestock grazing areas.
“The next 30 days is expected to bring 100 plus temperatures and little rain to the plains. The drought meter is expanding its reach and some areas of the country will be forced to move cattle early.
“Some buyers are expressing the opinion that replacement prices have overrun the price target that is sustainable for beef in a crippled economy. Breakevens for late year fed cattle reached $110 in the December contract—$15 above the current cash prices. Of course, packer margins are well over $200/head and some of the margin could come out of their pocketbook by year-end without a dramatic increase in box prices.” — Pete Crow, WLJ publisher
