The Memorial Day holiday shook up the markets last week. Sale barns and slaughter plants alike had a short week, which had some palpable effects on prices.
As with the week before, negotiated cash fed cattle trade was slow to start last week. By the afternoon report on May 31, barely more than 5,000 head had been confirmed sold for $110 live and $175-178 (average $177.19) dressed. This was about $1 higher than prices set the week before, but analysts were still predicting a steady-at-best cash week.
The two big cattle market news items of the week were the sudden limit-up spike in most live cattle futures contracts on Wednesday, and the release of records showing the prior week’s fed cattle kill was larger than anyone would have guessed.
“Coming in at 539,692 head, the industry used approximately 90 percent of its maximum capacity utilization and topped last year’s largest weekly fed kill by 17,000 head,” noted Cassie Fish of the Beef Report, referencing the week of May 14-19. She reported that it was the largest fed cattle slaughter week since June 2011.
“The industry ought to see weekly June fed kills as large, or even larger than this level, as the supply chain continues to move the large numbers of market-ready cattle through the system better than most expected. Extraordinary demand is playing a key role in supporting this accomplishment just as are historic packer profits and hefty retail margins.”
“Total beef demand remains positive and should continue to post benefits from rising employment and wages,” commented Andrew Gottschalk of Hedgers Edge. However, he cautioned against getting too excited about the live cattle futures’ moves.
“A rebound in futures does not alter the ongoing buildup in fed cattle supplies; nor does it eliminate the upcoming ‘dog-days’ of summer from the calendar.”
Near-term live contracts settled May 31 at $105.05 (+40 cents from May 25) for June and at $103.95 (+$1.65) for August.
The cutouts held on tenaciously to their respective positions last week compared to a week before, with Choice gaining slightly to close at $228.20 and Select losing a bit with $204.47.
“Product, as expected, will benefit from this week’s holiday-reduced production schedule,” Gottschalk noted. “A full production schedule next week at 650,000+ head will exert renewed selling pressure on the beef cutout.”
His estimated downside objective is $210 for Choice, followed by $198-200.
Feeder cattle
Many feeder cattle auctions were either canceled or had very few receipts due to the Memorial Day holiday. In those that did still hold a sale, volumes were generally lower than in past weeks.
Medium and large 1-class (#1) steers weighing 700-800 lbs. seemed to gain more ground on prices last week. For the most part, average prices were in the mid- to upper-$140s.
California: Feeder cattle were called steady at the Cattlemen’s Livestock Market of Galt. Benchmark steers sold between $120-145.
Kansas: Midway through the weekly Pratt Livestock auction, receipts were estimated at 2,000 with mid- to heavyweight feeder steers called up $2-6. Heifers of the same weight class were called a firm steady to $3 higher. Most #1, 7-weight steer lots ranged narrowly from $140-142, with a lot of value-added benchmark steers selling for $150.
Nebraska: The Huss Platte Valley Auction sold just over 2,000 head last week, down from the 3,327 head sold the week before. Comparable lots of feeders over 650 lbs. sold up $2-10 with preference for steers. Demand was called good on the calves. Prices on #1, 7-weight yearling steers ranged from $147-158.
New Mexico: The Clovis Livestock Auction sold more cattle last week than the week before, with prices on feeder steers under 700 lbs. down $5-8. Heavier steers were up $1. Heifers under 700 lbs. were down $2-5 with the exception of 3-weights, which were up $4. Benchmark yearling steers ranged from $136.25-141.25.
Oklahoma: The OKC West-El Reno sale sold over 12,100 head of feeders last week with steers trading $2-3 higher and heifers firm. Heifer calves were up $3-6 while steer calves were steady to up $2. Number 1, 7-weight yearling steers ranged from $142.50-149.75, and a small lot of calves averaged $141.
South Dakota: Feeder cattle over 800 lbs. were sold with firm undertones last week at the Mitchell Livestock Auction. Demand was called good, especially for the lots of backgrounded feeders. Prices for benchmark yearling steers ranged from $139.50-155. Most of the averages were in the low-$150s.
As with the live cattle futures, near-term feeder cattle futures saw overall gains for the week thanks to the near limit-up trade that happened on Wednesday. From settlement on May 25 to May 31, the June contract gained a net $2.48 at $147.40, and the August contract gained a net $2.85 with $147.30.
“Sharp early pressure in all livestock futures has quickly replaced recent market gains with concern that additional market weakness may flood into the complex,” commented Rick Kment, DTN analyst, on Thursday afternoon.
“There is a growing focus on potential increased price volatility in all livestock trade through the end of the month of May.” — Kerry Halladay, WLJ editor
