Wednesday markets
Cattle markets are a little lackluster so far this week; just a handful of fed cattle have traded hands and the big buy is expected Thursday and Friday. Wednesday’s afternoon cash trade report showed 26,679 head had traded between $107-$109, mostly $108 live and $169 dressed. There were 17,000 formula cattle weighing 903 lbs., priced at $173.09. Beef prices have been moving down with Choice at $211.14 and Select trading at $199.27 on 173 loads. Slaughter levels are steady with last week’s pace and packer margins remain high.
In the futures market, ShayLe Stewart, livestock analyst at DTN, reported, “Live cattle contracts are tipping lower like the feeder cattle complex—as it seems incredibly difficult to persuade traders to look at the two cattle contracts. October live cattle are down $0.45 at $108.37, December live cattle are down $.95 at $110.27.
“The market’s cash cattle trade hasn’t interested feedlots although bids are becoming more readily available. In Kansas and Texas cattle are bid at $108, and in Nebraska cattle are bid at $107. Feedlots have explicitly seen over the last four weeks the advantages in waiting until later in the week to market their cattle and its looking like this week’s trade could end up waiting until Thursday or Friday to really move cattle.”
Cassie Fish, market analyst at the Beef said, “Someone wants out of cattle futures. Open interest lost 9,300 contracts already this week and though futures had a nice rally off the lows yesterday and tried to follow-through higher today, the market soon failed again.
“No one seems to know where the relentless selling is coming from. The only hint is that the most recent Commitment of Traders report showed a drop in index and managed fund positions. How low is total live cattle futures open interest for October? The lowest since 2016. Usually open interest increases in Q4 but with the pandemic and the election, all bets are off.
“Some will try and link the action to the sloppy cutout, boxes slipping now like they were expected to do around October 1. But packers are still very profitable, and the cutout is only $6 cheaper than a year ago this week, after recently being the second highest for any time in history. Loins had an uncharacteristic rally a couple of weeks ago and are correcting hard now, down $29 while the rib seasonally rallies.
“Of course, the futures sell off continues to inspire cattle feeders to sell at the softer side of last week’s trading range. There has been $169 in the north, but no $170. $108 in the south but no $109. Unfortunately for cattle feeders the improved inventory position in some yards, less and greener cattle, is not helping this week. Futures are raining on that parade. As of yesterday, 18k head had traded and volume has been moderate today in the north.”
Stewart also reported, “Feeder cattle contracts made a run at higher prices earlier Wednesday morning but as traders remain leery of the cattle contracts—a lack of followed through support left the market trading lower. In respect to higher input costs, feeders haven’t been overly pressured by Wednesday’s corn market but as the noon hour approaches nearby corn contracts are seeing some mildly higher prices. October feeders are up $0.25 at $138.37, November feeders are down $0.50 at $136.32.”
OKC West Livestock in El Reno, OK, sold 5,728 head and reported compared to last week: Feeder steers sold mostly steady; feeder heifers traded $6-8 lower. Demand was light to moderate. Long-weaned and light-weight steers calves sold mostly steady to $2 higher where comparable sales were noted. Un-weaned, fresh off the cow cattle were sharply lower instances to as much as $10 lower. Weaned heifers were lightly tested but few sales steady to weak. Demand was moderate. Quality was average to attractive. Benchmark feeder steers weighing 777 lbs. averaged $140.60.
“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,” reported the Cattle Report. “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 again,” the Cattle Report concluded. — Pete Crow, WLJ publisher
