The markets continued their weak sideways, semi-directionless behaviors last week ahead of the Memorial Day weekend and the release of May Cattle on Feed (COF) report.
Pre-report estimates for the report were for on-feed populations as of May 1, 2019 to be up 2.9 percent compared to May 1, 2018; placements of cattle into feedlots during April to be up 13.5 percent; and marketings of cattle out of feedlots during April to be up 6.6 percent.
“If analysts are correct in their estimates, this would be the biggest May 1 cattle on feed supply,” noted the CME Daily Livestock Report last week.
“On average analysts think April placements were 13.5 percent higher than a year ago. This is a big increase and, if correct, would represent the biggest number of cattle placed on feed during the month of April. However, one needs to consider that placements last year were relatively light at 1.695 million head.”
By close of trade Thursday, May 23, over 63,800 head of negotiated cash fed cattle had been confirmed sold for the week. Prices on Thursday ranged from $114.50-118.50 (avg. $115.82) live and $181-187 ($184.64) dressed. This would be up roughly $1 on live and down about $2 on dressed. Expectations for last week were for a steady to weak cash fed cattle trade.
“Packers are securing supplies for another short production schedule next week, which will be challenged to exceed 590,000 head,” projected Andrew Gottschalk of Hedgers Edge.
“A narrowing in the cash basis, coupled with many cattle being sold at or below their respective break-even price level should begin to slow producers’ willingness to unload market-ready cattle. The transition from yearlings to calf-feds provides the best opportunity for a cash rebound.”
However, he warned that the “dog-days” of summer that follow the Fourth of July will soon be upon us.
“Even in the best of supply conditions, the market is prone to renewed selling during that timeframe,” he continued. “Cash support is $108-111, followed by $105.”
Near-term live cattle futures saw slight net declines over last week. The June contract lost 48 cents to settle Thursday at $110.80, while the August contract lost 78 cents to settle at $108.15.
“Fed cattle futures have come under pressure in recent weeks, in part because beef clearance at retail has not been strong enough given the supply of cattle currently on feed,” noted the CME Daily Livestock Report.
“Market participants appear to think that lower prices are needed in order to accelerate beef sales and avoid further price adjustments when beef demand seasonally slows down later this summer and into the fall.”
Cutouts were similarly pressured and ended the week mixed. The Choice cutout gained a net 68 cents over the course of the week to close at $220.79 on Thursday. Meanwhile, the Select cutout closed at $206.53, down a net $1.75.
Feeder cattle
The demand for, supply of, and prices paid for cash feeder cattle were all over the board last week, according to the surveyed feeder cattle auctions. In several cases, the sales volume was a fraction of what it had been the week before, and price trends were anywhere from down $8 to up $6.
Prices on medium and large #1 steers weighing between 700-800 lbs. ranged from the low $130s to the low $160s. Averages trended in the $140s.
California: The Cattlemen’s Livestock Market in Galt sold more than double the volume of cattle last week at considerably lower prices. Feeder cattle under 650 lbs. were called $2-7 lower, while heavier feeder cattle were down $5-7. Number 1, 7-weight steers still held their ground respectably, bringing in prices of $130-145.
Iowa: The Bloomfield Feeder Cattle auction sold just over 1,000 head of feeders, down considerably by volume compared to the prior week. Prices too were down, with most steers called $6-8 lower. The exception was 6-weights, which sold up $1-4. Heifers were called mostly $3-6 higher. Two lots of #1, 7-weight yearling steers sold between $145.75-154.75.
Kansas: The Winter Livestock auction sold a mere fraction of the number of feeders last week compared to the week before; 1,480 head vs. 6,048 head. This made for difficulties on trade trends, but feeder steers were called generally $4-6 higher and heifers were unevenly steady. Demand at the sale was called moderate to good. Two lots of benchmark steers sold between $137.75-147.35.
Missouri: The Joplin Regional Stockyards doubled its volume of feeders sold last week, yet saw prices fall. Feeder calves were $2-6 lower, while yearlings were down $2-3. Demand was called moderate. Two lots of benchmark yearling steers ranged from $138-153, while an eight-head lot of unweaned steer calves weighing 727 lbs. averaged $133.55.
Nebraska: Feeder volumes at the Huss Livestock Market were just under 3,000 head, and a weak steady compared to the prior sale. Prices, however, were steady to up $6 on steers. Heifers under 650 lbs. sold steady to $5 lower, while heavier heifers sold steady to $3 higher. Demand was called good. Two lots of benchmark steers sold between $151.50-161.50.
Oklahoma: The OKC West-El Reno sale sold half the number of feeders last week compared to the week before. Where comparable, feeder steers were steady to up $2, while heifers were mostly steady with the exception of 7-weights, which were also $2-3 higher. Calves were too lightly tested for an accurate test. One lot of 25 head of 751-lb. yearling steers averaged $142.50.
South Dakota: Sales volumes were slightly down at the Mitchell Livestock Auction last week with 2,418 head of feeders sold. Steers were called steady in a narrow comparison, except especially heavy steers, which sold for $2-3 higher. Heifers were unevenly steady, except for 7-weights, which were up $2-6. Backgrounded, home-raised yearlings drew special attention, even though cattle feeders remain defensive due to the struggling futures and cash fed market. One large lot of 151 head of 715-lb. yearling steers averaged $147.35.
The near-term feeder futures were mixed by the end of last week, with the May contract gaining just over a net $1 with a settlement of $135.60, while the August contract settled Thursday at $143.03, a net loss of almost $1.50.
“Light support was seen Thursday as traders focused on recent support in the live cattle market on lower beef supplies and increased exports,” noted DTN’s Analyst, Rick Kment.
“But concerns over how the Cattle on Feed report Friday will affect the feeder cattle and live cattle trade are still front and center on traders’ minds. But with bearish expectations, it is likely that much of the pressure has already been factored into the market over the last several days.” — Kerry Halladay, WLJ editor
