Wednesday markets
Now that the beef cutout has found its normal trading range, packers will have to buy cattle a bit more judiciously, the support premiums will be gone and its every man for himself. Cash cattle trade has been robust the past few weeks, but feeders are starting to draw on their inventory of fed cattle.
The market appears confused with a million head of over-finished cattle and what to do. We’ve been here before and must do what we always do—eat our way out of it. However, we have robust export markets that could help us out. The big problem remains of processing enough cattle to fulfill orders and starting to buy back beef demand. Country trade has been slower this week.
ShayLe Stewart, DTN livestock analyst, said, “Some light trade has been reported in parts of North at $165-167, generally steady with Tuesday’s light trade. In other areas, bids remain scarce. Asking prices are around $115-118 in the South, and $180 plus in the North. Light business is also being reported in parts of the South at $108, $4 lower than last week’s weighted averages.
“As the week meets Wednesday livestock contracts have traded lower throughout the day and cash cattle trade is slowly starting to show some interest. Seeing that the futures market is lower throughout all three contracts, the day may very well close with this negative trend and cash cattle enthusiasts don’t have much luck on their side this week.
Futures were softer and ended lower on nearly all contracts. June live cattle lost 27 cents to close at $96.60 and August was off $1.30 to $96.50. Feeders started off the week in good shape but fell apart, the August contract was down $1.57 to $132.65 and September was down $1.40 to close at $134.15. Feeder futures have been struggling to get over the $138 mark.
Boxed beef markets continue to decline with Choice falling $10.95 today to $236.06 and Select down $5.11 to $222.84. This is a more normal trading range for the cutout. However, grinding markets still have good strength with ninety percent lean at $271.96 and the 50s trading a bit higher to $84.88. The 80/20 percent ground beef at Kroger stores was selling for $6/lb.
Cassie Fish commented in The Beef, “Cash cattle prices so far are lower too, the highest live price paid so far this week $105 and dressed prices are mostly at $165. Last week’s average was just under $113 live and $179 dressed. It is clear the packer sees the lower trajectory of wholesale beef prices, knows margins are contracting sharply and has adjusted prices that they are willing to pay this week accordingly.
“The growing backlog of market-ready fed cattle has become more apparent and worrisome this week. It simply isn’t possible to accommodate all cattle offered for sale and buyers seem to be focusing on the cattle most needing to go. Lots of cattle have been standing 30 days past their out-date, some 45 days.”
The folks at the Cattle Report are wondering how the industry is going to deal with the backlog. “This past week’s slaughter was 636,000—only 29,000 under last year’s 665,000. Beef production, however, was near last year’s levels because of large outweighs of cattle. Total beef production was 522 million pounds compared to 525 last year.
“The coming weeks are likely to report slaughter volumes equal to and above last year. Combined with carcass weights currently 50 lbs. greater than last year, the market will be overwhelmed with beef and there is currently no plan to deal with the excess beef.”
Hub City Livestock Auction in Aberdeen, SD, offered 4,035 head today and compared to last week: best test on steers 700-750 lbs., 800-850 lbs., 950-1000, and 1050-1100 lbs. was steady to $3 higher. Heifers were not well compared for an accurate trend.
Moderate to good demand for another large offering this week. Quality varied more this week than last week, anywhere from plain to attractive quality. Flesh similar to last week with most of the offering in moderate to moderate plus flesh with some heavy flesh at times. A moderate to active market today with slightly less enthusiasm than last week to procure cattle. — Pete Crow, WLJ publisher
