It was shaping up to be a depressing week in the markets last week, when late on Thursday the futures reacted to news out of China.
“Strong support flooded livestock trade as renewed focus on China trade sparked limit hog market gains,” reported DTN Analyst, Rick Kment late in the afternoon on April 4.
“Technical support quickly developed in cattle markets, posting triple-digit gains in most contracts.”
It wasn’t limit-up trade, but after days of leaking lower, $1-2.50 gains in near-term futures was a happy reprieve. Compared to Friday, March 29, the near-term futures settlements on Thursday, April 4 were up about $2 for live contracts—$127.55 for April and $121.58 for June—and up $1 for feeder contracts at $146.33 for April and $150.08 for May.
“With news of the final push on a trade deal between the U.S. and China dominating agricultural market headlines this morning, oversold CME cattle futures are catching a significant bounce,” commented Cassie Fish of the Beef Report on Thursday afternoon.
“This isn’t the first and won’t be the last of China news influencing a rally in CME cattle futures. Some wholly believe global demand for protein will lift all protein prices. The timing and the magnitude continue unknown and as elusive as ever. Yet, the promise of the potential of this demand helping the U.S. manage record total protein production in 2019 looms large.”
Beef demand at home continues to remain stable ahead of the industry’s traditionally best demand period. Beef cutouts closed at $226.74 (+70 cents) for Choice and $218.36 (-53 cents) for Select on Thursday.
“The beef cutout remains sluggish, as pre-Easter activity in hams limits interest in beef,” commented Andrew Gottschalk of Hedgers Edge.
“The good news remains that the best demand period lies ahead of this industry, with good beef demand expected from May through the July 4th period. Seasonally, beef demand improves by approximately 6 percent during the month of May, representing the best demand month of the year.”
Cash cattle continue to be unpredictable, however. Trade in cash fed cattle developed earlier last week than has been the recent norm, but prices disappointed early-week expectations. With over 41,300 head of negotiated cash fed cattle having been confirmed sold for the week on Thursday, prices of $124 live and $200-205 (avg. $204.10) dressed were established. These prices were down about $2 for live and $1.50 for dressed compared to the prior week’s averages.
Fish announced the seasonal high in cash cattle has been confirmed and focused on future fundamentals.
“Packer leverage has never been greater and their commitment to keeping inventory around them and stepping cash cattle prices is clear as the market moves forward into the largest fed cattle supplies in eight years.”
Cash feeder cattle did the opposite in the big feeder auctions last week. Most prices on feeder steers were up $1-3, with the Hub City Livestock Auction of South Dakota and the Winter Livestock Auction of Kansas setting the high in terms of steer premiums at up $6 on mid-weight steers. Feeder heifers were mixed across the surveyed auctions, ranging from down $2 to up $3.
Prices on medium and large #1 steers weighing between 700-800 lbs. ranged from the mid-$130s (the Winter Livestock Auction) to the mid-$160s (the Bassett Livestock Auction Market of Nebraska and the Hub City Livestock Auction). Most prices were in the mid- to upper-$140s, however. — Kerry Halladay, WLJ editor
