Cash fed cattle markets were slow to develop last week; early trade was seen $2-3 higher to $112 live and $174 dressed. With the October futures contract expiring, cattle feeders were intent on pricing cattle off the December board, which was trading at $118 last Thursday. The futures market wasn’t as optimistic, with the October contract losing $1.70 in late session trade to expire at $111.67. Feeders have been offering cattle at $115. Winter storms moved through Colorado, Nebraska and Kansas, which also slowed trade and delivery.
Boxed beef markets were much stronger for the week with the Choice cutout reaching $231.67 and Select at $206.49. The Choice-Select spread was $25.18. Last Wednesday, the Choice cutout lost 47 cents while the Select beef was $3.40 higher. This would indicate that chucks and rounds are going into the grinding market. Boneless beef markets have been quite good, with 90 percent lean trading at $223.51. This should add some strength to cull cow markets.
Two weeks ago, slaughter was 640,000 head and it appears packers have slowed down slaughter rates slightly, processing 466,000 head as of last Thursday, which was running 7,000 head lower than last week but 14,000 head lower than the same week last year. Year-to-date beef production is running two-tenths of a percent below last year while the number of head slaughtered was running 1.1 percent above last year.
The latest comprehensive fed cattle report showed carcass weights up 7 pounds at 880 pounds, which is 15 pounds over last year. Comparisons to prior year moving forward will be impacted by last year’s winter storms. Quality grade improved 4 percent from prior week.
The Cattle Report said, “In a week when optimism was the flavor of the day, some of the benchmarks were not bullish. Sales and slaughter volumes this past week were not large and probably are backing some cattle up in the nation’s feedlots. This is confirmed by rising carcass weights that are now running above prior year, resulting in increasing amounts of tonnage of beef above the slaughter numbers.
“Placements in September came in on target, but we are far enough into October to know the October number could be a big number of cattle going on feed and will be well above prior year. The cattle placed on feed also will be heavier. The September placements featured increases in the lighter weight cattle, spreading the marketing periods next year.
“Against this backdrop of negative news is some good news,” the report continues. “No official word on the reopening of the Tyson plant but the rumor mill is full of stories of a possible December opening. Processing margins are excellent, and packers will need little encouragement to push up the slaughter levels and work off excess numbers of fed cattle.
“Hints that the China trade deal may be in trouble will not change the underlying fact that China needs large supplies of red meat. Whether the meat is sourced here or elsewhere, it will draw down global supplies of red meat and improve demand for beef as world pork production cannot meet the world’s needs. The bilateral Japanese trade deal should be signed and ready to phase in reduced tariffs on our exports to Japan.”
Feeder cattle markets have been holding their own. The October feeder contract went off the board at $145.95 and November was at $147.60, showing some optimism going forward. The latest feeder cattle index was at $145.83. Northern Plains markets were seeing seasonally large runs of calves and yearlings. Phillip, SD offered 10,307 head last week with 500-600-lb. steers trading between $146-176.50. Yearling steers traded between $146-151. Winter Livestock in La Junta, CO, offered 4,951 head, with 500-600-lb. steer calves trading between $145-170 and yearlings between $135-148. West Coast markets were strong on seasonally low volume. Turlock, CA, reported 500-600-lb. steers trading between $138 and $154 and yearling-weight steers between $125-137. High yielding beef cows were trading between $62-73. —Pete Crow, WLJ publisher