The markets got a shot in the arm last week from hogs.
Last Tuesday saw limit-up trade in the hog futures, which seemed to have a cascade effect on other livestock futures. The feeder cattle futures saw triple-digit gains that day, with most contracts gaining over $3 or even $4. This surge cooled off on Wednesday, but by close of trade Thursday, near-term contracts had still posted net gains of about $4 with $142.63 (August) and $143.28 (September).
Speaking specifically of the Tuesday gains, DTN Analyst Rick Kment noted, “This allowed futures to break out of their recent trading range and move to their highest levels since May. Concerns of higher feed prices limiting cattle price support remain, but the drop in corn futures Tuesday helped to ease those concerns somewhat.”
Near-term live cattle futures also benefited from this knock-on effect, though not to the same extent. Tuesday gains were over $1, which the contracts mostly held onto for net gains over the course of the week, settling at $107.88 (August) and $109.33 (October).
“Cattle charts look positive,” opined Cassie Fish of the Beef Report on Wednesday afternoon.
“Yesterday was an outside day with a higher close above key moving averages, clearly breaking out of the consolidation near the lows that kept the market mired for several weeks. The 10-day has crossed above the 40-day for the first time since April and it’s clear the market, at worst, will spend the remainder of the summer in a trading range and, at best, has additional upside.”
The activities of the futures on Tuesday helped firm up cattle feeders’ determination on prices. Early-week estimates for cash fed cattle trade was for steady to higher prices compared to the week before. It took a while for negotiated cash fed trade to materialize, but once it did on Thursday, prices were indeed up.
Thursday afternoon saw just under 14,600 head of negotiated cash fed cattle sold for the week, with almost all of that happening that day. Prices on Thursday were $112.50-116.50 (average $114.55) live and $180-185 ($183.80) dressed.
“Last year, with a very similar front-end fed cattle supply, prices rebounded $8/cwt during July, only to trend lower and re-test the late-June low by the end of August,” noted Andrew Gottschalk of Hedgers Edge on Thursday.
“A like rebound this year basis W KS would establish a price objective at $116 for late-July. Intense competition from pork may, however, limit any rally during July.”
The situation in the cash feeder cattle markets was impressive compared to the last week in June when most auctions held their most recent sale. That said, many feeder cattle auctions were slow to get back in action after the Independence Day week. The few surveyed auctions that reported sales showed strong gains, however. Prices for medium and large #1 steers weighing between 700-800 lbs. reached the $160s, something not seen for months now.
Kansas: The Farmers and Ranchers Livestock Commission in Salina sold just under 2,000 head of feeder cattle last week. This auction hasn’t held a sale since May, so there were no market trends offered. Most of the offering was said to be coming off of native pasture to good to very good demand from buyers. Number 1, 7-weight yearling steers sold between $140-158.
Missouri: The Joplin Regional Stockyards sold 4,341 head of feeders last week, down about 1,600 head compared to the week before. Calves were called steady, while yearling feeders were steady to up $3. Demand was called good. Benchmark steers sold between $140-150, with one lot of unweaned calves averaging $135.
Nebraska: The Bassett Livestock Auction sold 7,650 head of feeders, up from the prior sale’s 5,200 head. The prior sale happened in the last week of June. Compared to those prices, mid-weight feeder steers traded $5-14 higher and mid-weight heifers were up $3-10. Demand was called very good. A pair of large lots of benchmark yearling steers sold with prices ranging from $152.50-168.25.
New Mexico: Sales volumes increased to 1,702 head last week at the Clovis Livestock Auction. Compared to prices set in late June, light steer calves were up $3-5 while steers over 600 lbs. were up $6-9. Light heifer calves were down $4, while calves and feeders over 500 lbs. were mostly up $2-3 with instances of $5-9 higher on 6- and 7-weight heifers. Benchmark steers ranged from $125 for a 30-head lot of “fleshy” yearlings to $138.50 for a 17-head lot of 735-lb. yearlings.
Oklahoma: The OKC West-El Reno sale sold almost 11,400 head of feeders. Compared to prices set in the June 25 sale, feeders traded up $7-9 for both sexes. Calves were too lightly tested for a market trend. Demand was called good to very good and was especially noted for long-weaned calves. Number 1, 7-weight yearling steers sold between $139.50-149, with one small lot of unweaned calves averaging $134.
South Dakota: Compared to the sale two weeks prior, the Hub City Livestock Auction saw the best test on heavyweight steers, with prices up $8-10. For heifers, the best test was on 9-weights, which were up $3-4. Demand was called good, especially for several strings of home-raised backgrounded cattle. Two lots of benchmark steers sold between $145.25-156.50.
The only segment of the cattle and beef market that was down week to week was the cutouts. The Choice cutout lost a net $3.90 with $213.77 on Thursday and the Select cutout lost a net $4.01 with $190.79.
Despite this, Fish expressed excitement over recent bullish carcass and slaughter data.
“The USDA released carcass weight data for the week ended June 29 and steer carcasses were 854 pounds, unchanged from the prior week, 11 pounds below a year ago, and the five-year average and the lowest for that week since 2011!” she reported.
“The fed kill that week was 539k head, the second largest fed kill of 2019. By all measurements, this data is bullish.”
She went on to restate the fact that peak fed cattle supplies are behind the market, not in front of it.
“The largest fed kills are in May and June every year. Based on placement data, fed cattle supplies in Q3 are not much larger than a year ago and the industry is more current than a year ago. The north is where supplies are tight and there is more packer competition and the north is where price direction will be determined with the south continuing to trade discount.” — Kerry Halladay, WLJ editor